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1. | OVERVIEW |
SemGroup Corporation is a Delaware corporation headquartered in Tulsa, Oklahoma that provides diversified services for end-users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. SemGroup Corporation began operations on November 30, 2009, as the successor entity of SemGroup, L.P., which was an Oklahoma limited partnership.
On July 22, 2008 (the "Petition Date"), SemGroup, L.P. and certain subsidiaries filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Also on July 22, 2008, SemGroup, L.P.'s Canadian subsidiaries filed applications for creditor protection in Canada under the Companies' Creditors Arrangement Act (the "CCAA"). Later during 2008, certain other U.S. subsidiaries filed petitions for reorganization. While in bankruptcy, SemGroup, L.P. filed a Plan of Reorganization with the court, which was confirmed on October 28, 2009. The Plan of Reorganization determined, among other things, how pre-Petition Date obligations would be settled, the equity structure of the reorganized company upon emergence, and the financing arrangements upon emergence. SemGroup Corporation emerged from bankruptcy on November 30, 2009 (the "Emergence Date").
The accompanying consolidated financial statements include the activities of SemGroup Corporation (the "Successor") from November 30, 2009 through December 31, 2011, and the activities of SemGroup, L.P. (the "Predecessor") from January 1, 2009 through November 30, 2009. The terms "we," "our," "us," "the Company" and similar language used in these notes to consolidated financial statements refer to SemGroup Corporation, SemGroup, L.P. and their subsidiaries. As described in Note 3, we applied fresh-start reporting on the Emergence Date. As a result, the financial statements of the Successor are not comparable to the financial statements of the Predecessor.
Our reportable segments include the following:
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We previously referred to our crude business as SemCrude, but following the contribution of SemCrude, L.P. to Rose Rock, we have decided to refer to this reportable business as "Crude". Crude conducts crude oil transportation, storage, terminalling, gathering, blending, and marketing operations in the United States. Crude's assets include |
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a 2% general partner interest and a 57.0% limited partner interest in Rose Rock Midstream, L.P. ("Rose Rock"), which owns an approximate 640-mile crude oil pipeline network in Kansas and Oklahoma, a crude oil gathering, storage and marketing business in the Bakken Shale in North Dakota and Montana and a crude oil storage facility in Cushing, Oklahoma with a capacity of 5.0 million barrels; and |
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a 51% ownership interest in White Cliffs Pipeline, L.L.C., ("White Cliffs") which owns a 527-mile pipeline that transports crude oil from Platteville, Colorado to Cushing, Oklahoma ("White Cliffs Pipeline"). |
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SemStream, which owns 8,932,031 common units representing 32.2% of the total limited partner interests, as of December 31, 2011, in NGL Energy Partners LP ("NGL Energy"), which markets, transports and stores natural gas liquids in the United States, and a 7.5% interest in the general partner of NGL Energy. SemStream also owns and operates a residential propane supply business in Page and Payson, Arizona. |
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SemCAMS, which provides natural gas gathering and processing services in Alberta, Canada. SemCAMS owns working interests in, and operates, four natural gas processing plants and a network of 600 miles of natural gas gathering and transportation pipelines. |
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SemGas, which provides natural gas gathering and processing services in the United States. SemGas owns and operates over 800 miles of gathering pipelines in Kansas, Oklahoma, and Texas and three processing plants in Oklahoma and Texas. |
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SemLogistics, which provides refined product and crude oil storage services in the United Kingdom. SemLogistics owns a facility in Wales that has a storage capacity of approximately 8.7 million barrels. |
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SemMexico, which purchases, produces, stores, and distributes liquid asphalt cement products in Mexico. SemMexico operates twelve manufacturing plants and two emulsion distribution terminals. |
We previously had a seventh segment, SemCanada Crude, which aggregated and blended crude oil in Western Canada. Due to adverse market conditions impacting this segment, we sold the property, plant and equipment of SemCanada Crude in late 2010 and began winding down its operations (Note 6).
We disposed of numerous assets while in bankruptcy, including (Notes 6 and 7):
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SemFuel, a refined products marketing and storage business in the United States; |
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SemMaterials, an asphalt processing, storage, and marketing business in the United States; |
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SemEuro Supply, a refined products marketing business in Europe; |
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SemCanada Energy, a natural gas marketing business in Canada; |
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SemGroup Energy Partners, L.P. ("SemGroup Energy Partners" or "SGLP"), a crude oil and asphalt storage business in the United States (currently known as Blueknight Energy Partners, L.P.); and |
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certain other businesses, none of which were significant to these consolidated financial statements. |
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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Consolidated subsidiaries
Our consolidated financial statements include the accounts of our controlled subsidiaries, including Rose Rock Midstream, L.P. All significant transactions between our consolidated subsidiaries have been eliminated. Outside ownership interests in consolidated subsidiaries are reported as non-controlling interests in the consolidated financial statements.
Proportionally consolidated assets
Our SemCAMS segment owns undivided interests in certain natural gas gathering and processing assets, for which we record only our proportionate share of the assets on the consolidated balance sheets. The net book value of the property, plant and equipment recorded by us associated with these undivided interests is approximately $167.4 million at December 31, 2011. We serve as operator of these facilities and incur the costs of operating the facilities (recorded as operating expenses in the consolidated statements of operations) and charge the other owners for their proportionate share of the costs (recorded as other revenue in the consolidated statements of operations).
Equity method investments
At the end of September 2010, we sold a portion of our ownership interests in White Cliffs to two unaffiliated parties, which reduced our ownership interest in White Cliffs from approximately 99% to 51%. Upon closing of this sale, the other owners received substantive rights to participate in the management of White Cliffs. Because of this, we deconsolidated White Cliffs at the end of September 2010, and began accounting for it under the equity method.
On November 1, 2011, we contributed the long-lived assets and certain working capital of our SemStream segment to NGL Energy in return for limited partner interests in NGL Energy, an interest in the general partner of NGL Energy, and cash for working capital. We hold two seats on the board of directors of the general partner of NGL Energy, and we account for our investment in NGL Energy and its general partner under the equity method.
Cost method investments
We lost control of several of our subsidiaries as a direct or indirect result of the bankruptcy petitions, including all Canadian subsidiaries, SemGroup Holdings, L.P. (which held our ownership interests in SemGroup Energy Partners), and Wyckoff Gas Storage Company, L.L.C. These subsidiaries were de-consolidated during 2008 and subsequently accounted for as cost method investments. We regained control of SemCAMS and SemCanada Crude on the Emergence Date, and consolidated these subsidiaries again beginning on that date.
Discontinued operations
As part of the process of reorganizing to emerge from bankruptcy, we disposed of certain of our operations. As described in Note 7, SemFuel, SemMaterials, and SemEuro Supply met the criteria to be classified as discontinued operations in the consolidated financial statements.
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3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
USE OF ESTIMATES—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Our significant estimates include, but are not limited to: (1) allowances for doubtful accounts receivable; (2) estimated useful lives of assets, which impact depreciation; (3) estimated fair values of long-lived assets recorded in fresh-start reporting; (4) estimated fair values of long-lived assets used in impairment tests; (5) fair values of derivative instruments; and (6) accrual and disclosure of contingent losses. Although management believes these estimates are reasonable, actual results could differ materially from these estimates.
FRESH-START REPORTING—We adopted fresh-start reporting on the Emergence Date. In connection with fresh-start reporting, we recorded the following at the Emergence Date:
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assets, at their estimated fair values; |
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goodwill, to the extent our reorganization value (described in Note 8) exceeded the amounts attributed to specific tangible or identified intangible assets; |
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liabilities, at their fair values; and |
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deferred tax liabilities, based on the adjusted balances of the assets to which they relate. |
CASH AND CASH EQUIVALENTS—Cash includes currency on hand and demand and time deposits with banks or other financial institutions. Cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase. Balances at financial institutions may exceed federally insured limits.
RESTRICTED CASH—As described in Note 8, our Plan of Reorganization specified the total amount of consideration we would provide to all pre-petition creditors in settlement of their claims. At December 31, 2011, we had not yet completed the process of disbursing funds to settle pre-petition claims, as we had not yet completed the process of resolving all of the claims. The restricted cash balance at December 31, 2011 includes $37.5 million of cash that is restricted for this purpose. The December 31, 2011 restricted cash balance also includes $2.0 million of cash that is restricted for other purposes.
ACCOUNTS RECEIVABLE—Accounts receivable are reported net of the allowance for doubtful accounts. Our assessment of the allowance for doubtful accounts is based on several factors, including the overall creditworthiness of our customers, existing economic conditions, and the amount and age of past due accounts. We enter into netting arrangements with certain counterparties to help mitigate credit risk. Receivables subject to netting are presented as gross receivables (with the related accounts payable also presented gross) until such time as the balances are settled. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.
At the Emergence Date, as part of fresh-start reporting, we recorded accounts receivable at fair value. This was accomplished by reducing the allowance for doubtful accounts to $-0- and recording a corresponding reduction to accounts receivable. We report any amounts we have collected in excess of the estimated Emergence Date fair value as reductions to operating expenses in the consolidated statements of operations.
INVENTORIES—Inventories primarily consist of natural gas and natural gas liquids, crude oil, and asphalt. Inventories are valued at the lower of cost or market, with cost generally determined using the weighted-average method. The cost of inventory includes applicable transportation costs.
We enter into exchanges with third parties whereby we acquire products that differ in location, grade, or delivery date from products we have available for sale. These exchanges are valued at cost, and although a transportation, location or product differential may be recorded, generally no gain or loss is recognized.
PROPERTY, PLANT AND EQUIPMENT—Property, plant and equipment is recorded at cost (although, as described above, property, plant and equipment was adjusted to fair value at November 30, 2009 upon adoption of fresh-start reporting). We capitalize costs that extend or increase the future economic benefits of property, plant and equipment, and expense maintenance costs that do not. When assets are disposed of, their cost and related accumulated depreciation are removed from the balance sheet, and any resulting gain or loss is recorded as a gain or loss on disposal or impairment of long-lived assets in the consolidated statements of operations.
Depreciation is calculated primarily on the straight-line method over the following estimated useful lives:
Pipelines and related facilities |
10 – 31 years | |||
Storage and terminal facilities |
10 – 25 years | |||
Natural gas gathering and processing facilities |
10 – 31 years | |||
Office and other property and equipment |
3 – 31 years |
LINEFILL—Pipelines and storage facilities generally require a minimum volume of product in the system to enable the system to operate. Such product, known as linefill, is generally not available to be withdrawn from the system. Linefill owned by us in facilities operated by us is recorded at historical cost, is included in property, plant and equipment in the consolidated balance sheets, and is not depreciated. We also own linefill in third party facilities, which is included in inventory or in other noncurrent assets on the consolidated balance sheets.
IMPAIRMENT OF LONG-LIVED ASSETS—We test long-lived asset groups for impairment when events or circumstances indicate that the net book value of the asset group may not be recoverable. We test an asset group for impairment by estimating the undiscounted cash flows expected to result from its use and eventual disposition. If the estimated undiscounted cash flows are lower than the net book value of the asset group, we then estimate the fair value of the asset group and record a reduction to the net book value of the assets and a corresponding impairment loss.
GOODWILL—We test goodwill for impairment on an annual basis, or more often if circumstances warrant, by estimating the fair value of the asset group to which the goodwill relates and comparing this fair value to the net book value of the asset group. If fair value is less than net book value, we estimate the implied fair value of goodwill, reduce the book value of the goodwill to the implied fair value, and record a corresponding impairment loss. Prior to the Emergence Date, SemGroup L.P.'s policy was to test goodwill for impairment on December 31 of each year. Subsequent to the Emergence Date, SemGroup Corporation's policy is to test goodwill for impairment on October 1 of each year. See Note 6 for discussion of goodwill impairment.
During September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08, "Testing Goodwill for Impairment". This ASU is designed to simplify how entities test goodwill for impairment. Under the new standard, an entity may first assess qualitative factors to determine whether it is more likely than not that the fair value of an asset group is less than the carrying amount, for the purpose of determining whether it is necessary to estimate the fair value of the asset group to which the goodwill relates. We plan to adopt this new standard in 2012.
EQUITY METHOD INVESTMENTS—We account for an investment under the equity method when we have significant influence over, but not control of, the significant operating decisions of the investee. Under the equity method, we record in the consolidated statements of operations our share of the earnings or losses of the investee, with a corresponding adjustment to the investment balance on our consolidated balance sheet. When we receive a distribution from an equity method investee, we record a corresponding reduction to the investment balance.
For equity method investments for which we do not expect earnings information to be consistently available to record earnings in the quarter in which they are generated, our policy is to record equity earnings on a one-quarter lag. This does not have a material impact on our financial statements.
DEBT ISSUANCE COSTS—Costs incurred in connection with the issuance of long-term debt are reported as other noncurrent assets and are amortized to interest expense using the straight-line method over the term of the related debt. Use of the straight-line method of amortization does not differ materially from the "effective interest" method.
COMMODITY DERIVATIVE INSTRUMENTS—We generally record the fair value of commodity derivative instruments on the consolidated balance sheets and the change in fair value as an increase or decrease to product revenue.
As shown in Note 15, the fair value of commodity derivatives at December 31, 2011 and 2010 are recorded to other current assets or other current liabilities on the consolidated balance sheets. Related margin deposits are recorded to other current assets or other current liabilities on the consolidated balance sheets. Margin deposits are not generally netted against derivative assets or liabilities.
The fair value of a derivative contract is determined based on the nature of the transaction and the market in which the transaction was executed. Quoted market prices, when available, are used to value derivative transactions. In situations where quoted market prices are not readily available, we estimate the fair value using other valuation techniques that reflect the best information available under the circumstances. Fair value measurements of derivative assets include consideration of counterparty credit risk. Fair value measurements of derivative liabilities include consideration of our creditworthiness.
We have elected "normal purchase" and "normal sale" treatment for certain commitments to purchase or sell petroleum products at future dates. This election is only available when a transaction that would ordinarily meet the definition of a derivative but instead is expected to result in physical delivery of product over a reasonable period in the normal course of business and is not expected to be net settled. Agreements accounted for under this election are not recorded at fair value; instead, the transaction is recorded when the product is delivered.
PAYABLES TO PRE-PETITION CREDITORS—As described in Note 8, our Plan of Reorganization specified the total amount of consideration we would provide to all pre-petition creditors in settlement of their claims. At December 31, 2011, we had not yet completed the process of disbursing funds to settle pre-petition claims, as we had not yet completed the process of resolving all of the claims. We recorded a liability of $38.7 million at December 31, 2011 associated with these obligations, $0.9 million of which is associated with discontinued operations and is reported within other current liabilities. Of this amount, $37.5 million is held in cash accounts which are restricted for this purpose. The remaining amount is associated with certain accounts receivable and other current assets. Any proceeds received from these assets will be remitted to pre-petition creditors.
CONTINGENT LOSSES—We record a liability for a contingent loss when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We record attorneys' fees incurred in connection with a contingent loss at the time the fees are incurred. We do not record liabilities for attorneys' fees that are expected to be incurred in the future.
ASSET RETIREMENT OBLIGATIONS—Asset retirement obligations include legal or contractual obligations associated with the retirement of long-lived assets, such as requirements to incur costs to dispose of equipment or to remediate the environmental impacts of the normal operation of the assets. We record liabilities for asset retirement obligations when a known obligation exists under current law or contract and when a reasonable estimate of the value of the liability can be made.
DISCONTINUED OPERATIONS—SemMaterials, SemFuel, and SemEuro Supply are presented as discontinued operations in the consolidated financial statements. We classify a component of our business as a discontinued operation when we commit to a plan to sell the component and believe it is probable that a sale will be completed within one year. A component that is disposed of in a manner other than by sale is classified as discontinued when the component is actually disposed. Investments accounted for under the equity method, or the cost method, do not qualify for treatment as discontinued operations. A component that is disposed of may not qualify for treatment as a discontinued operation if we have significant continuing involvement in the operations of the component after the disposal.
Once a component meets the requirements to be classified as a discontinued operation, previous financial statements are retrospectively adjusted to reflect the component as a discontinued operation for all periods presented. Income and losses of discontinued operations (excluding corporate general and administrative expense allocations) are combined into one line on the consolidated statements of operations. The cash flows from discontinued operations are not separately identified in the consolidated statements of cash flows.
REVENUE RECOGNITION—Sales of product, as well as gathering and marketing revenues, are recognized at the time title to the product transfers to the purchaser, which typically occurs upon receipt of the product by the purchaser. Terminal and storage revenues are recognized at the time the service is performed. Revenue for the transportation of product is recognized upon delivery of the product to its destination. Certain revenue transactions are reported on a net basis, including derivative instruments considered held for trading purposes and certain buy/sell transactions (see "Purchases and Sales of Inventory with the Same Counterparty"). Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue).
COSTS OF PRODUCTS SOLD—Costs of products sold consists of the cost to purchase the product, the cost to transport the product to the point of sale, and the cost to store the product until it is sold.
PURCHASES AND SALES OF INVENTORY WITH THE SAME COUNTERPARTY—We routinely enter into transactions to purchase inventory from, and sell inventory to, the same counterparty. Such transactions that are entered into in contemplation of one another are recorded on a net basis.
INTEREST EXPENSE DURING REORGANIZATION—While we were in bankruptcy, we only recorded interest expense to the extent such interest was expected to be paid. Interest obligations that were expected to be compromised in the reorganization process (i.e., not paid in full) were not recorded as expenses. The total amount of interest that we would have been contractually obligated to pay, but which was compromised in the reorganization process and not recorded as an expense, was $221.0 million for the eleven months ended November 30, 2009.
CURRENCY TRANSLATION—The consolidated financial statements are presented in U.S. dollars. Our segments operate in four countries, and each segment has identified a "functional currency," which is the primary currency in the environment in which the segment operates. The functional currencies include the U.S. dollar, the Canadian dollar, the British pound sterling, and the Mexican peso.
At the end of each reporting period, the assets and liabilities of each segment are translated from its functional currency to U.S. dollars using the exchange rate at the end of the month. The monthly results of operations of each segment are generally translated from its functional currency to U.S. dollars using the average exchange rate during the month. Changes in exchange rates result in currency translation gains and losses, which are recorded within other comprehensive income (loss).
Certain segments also enter into transactions in currencies other than their functional currencies. At the end of each reporting period, each segment re-measures the related receivables, payables, and cash to its functional currency using the exchange rate at the end of the period. Changes in exchange rates between the time the transactions were entered into and the end of the reporting period result in currency transaction gains or losses, which are recorded in the consolidated statements of operations.
INCOME TAXES—Deferred income taxes are accounted for under the liability method, which takes into account the differences between the basis of the assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. We record valuation allowances on deferred tax assets when, in the opinion of management, it is more likely than not that the asset will not be recovered.
We monitor uncertain tax positions and we recognize tax benefits only when management believes the relevant tax positions would more likely than not be sustained upon examination. We record any interest and any penalties related to income taxes within income tax expense in the consolidated statements of operations.
REORGANIZATION ITEMS—As described in Note 1, we operated as a debtor-in-possession subject to the jurisdiction of the bankruptcy court during the eleven months ended November 30, 2009. Revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business during that period are reported as reorganization items in the consolidated statement of operations. The effects of the adjustments to the reported amounts of assets and liabilities resulting from the adoption of fresh-start reporting and the effects of the forgiveness of debt in the reorganization are reported within reorganization items in the consolidated statement of operations for the eleven months ended November 30, 2009.
RECLASSIFICATIONS—Certain reclassifications have been made to conform prior year balances to the current year presentation.
EQUITY-BASED COMPENSATION—We grant certain of our employees equity-based compensation awards which vest contingent on continued service of the recipient or on their achievement of specific performance targets. We record compensation expense for these outstanding awards over applicable service or performance periods based on their grant date fair value with a corresponding increase to additional paid-in capital.
COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)—Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Our comprehensive income (loss) consists of currency translation adjustments, changes in the funded status of pension benefit plans and changes in the fair value of interest rate swaps.
During June 2011, the FASB issued ASU No. 2011-05, "Presentation of Comprehensive Income". This ASU is designed to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This standard is complied with in these consolidated financial statements.
In December 2011, the FASB issued ASU 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which deferred certain presentation requirements in ASU 2011-05 for items reclassified out of accumulated other comprehensive income. We plan to adopt this standard in 2012.
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4. | ROSE ROCK MIDSTREAM, L.P. |
On December 14, 2011, our subsidiary Rose Rock Midstream, L.P. completed an initial public offering in which it sold 7,000,000 common units representing limited partner interests. We received proceeds of $127.1 million from this offering, net of underwriter discounts and other fees associated with the offering. We used these proceeds to make principal payments on long-term debt.
Subsequent to the initial public offering, we own 59% of the partnership consisting of 57% limited partner interests that include 1,389,709 common units and 8,389,709 subordinated units and the entire 2% general partner interest (342,437 units) of Rose Rock. We also own certain incentive distribution rights, which are described below. We control the operations of Rose Rock through our ownership of the general partner interest, and we continue to consolidate Rose Rock. The outside ownership interests in Rose Rock are reflected in "non-controlling interests in consolidated subsidiaries" on our consolidated balance sheet at December 31, 2011. The portion of the net income of Rose Rock subsequent to the initial public offering that is attributable to outside owners is reflected within "net income attributable to non-controlling interests" in our consolidated statement of operations for the year ended December 31, 2011.
Rose Rock intends to pay a minimum quarterly distribution of $0.3625 per unit to the extent it has sufficient available cash, as defined in Rose Rock's partnership agreement. Rose Rock's partnership agreement requires Rose Rock to distribute all of its available cash each quarter in the following manner:
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first, 98.0% to the holders of common units and 2.0% to the general partner, until each common unit has received the minimum quarterly distribution of $0.3625, plus any arrearages from prior quarters; |
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second, 98.0% to the holders of subordinated units and 2.0% to the general partner, until each subordinated unit has received the minimum quarterly distribution of $0.3625; and |
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third, 98.0% to all unitholders, pro rata, and 2.0% to the general partner, until each unit has received a distribution of $0.416875. If cash distributions to the unitholders exceed $0.416875 per unit in any quarter, the general partner will receive, in addition to distributions on its 2.0% general partner interest, increasing percentages, up to 48.0%, of the cash Rose Rock distributes in excess of that amount. |
On January 23, 2012, Rose Rock declared a distribution of $0.0670 per unit. This distribution is the first declared by Rose Rock and the prorated amount corresponds to its minimum quarterly cash distribution of $0.3625 per unit, or $1.45 per unit on an annualized basis. The proration period began immediately after the closing of Rose Rock Midstream's initial public offering, December 14, 2011, and continued through December 31, 2011. The distribution was paid on February 13, 2012 to all unitholders of record on February 3, 2012. Of this distribution, $0.7 million was paid to us and $0.5 million was paid to outside owners.
Certain summarized balance sheet information of Rose Rock as of December 31, 2011 is shown below (in thousands):
Cash |
$ | 9,709 | ||
Other current assets |
156,873 | |||
Property, plant and equipment |
276,246 | |||
Other noncurrent assets |
2,666 | |||
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Total assets |
$ | 445,494 | ||
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Current liabilities |
$ | 140,553 | ||
Long-term debt |
87 | |||
Partners' capital attributable to SemGroup |
177,323 | |||
Partners' capital attributable to noncontrolling interests |
127,531 | |||
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Total liabilities and partners' capital |
$ | 445,494 | ||
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5. | INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES |
White Cliffs
Until the end of September 2010, we owned 99.17% of White Cliffs, and the remaining interests were held by two unaffiliated parties. During 2010, both of these parties exercised their rights under an agreement to purchase additional ownership interests in White Cliffs. Subsequent to the closing of these transactions, we own 51% of White Cliffs. After purchasing these ownership interests, the other owners have substantive rights to participate in the management of White Cliffs; because of this, we deconsolidated White Cliffs at the end of September 2010, and began accounting for it under the equity method.
Certain summarized balance sheet information of White Cliffs is shown below (in thousands):
December 31, 2011 |
(unaudited) December 31, 2010 |
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Current assets |
$ | 11,653 | $ | 9,797 | ||||
Property, plant and equipment, net |
222,473 | 234,300 | ||||||
Goodwill |
17,000 | 17,000 | ||||||
Other intangible assets, net |
33,073 | 40,848 | ||||||
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Total assets |
$ | 284,199 | $ | 301,945 | ||||
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Current liabilities |
$ | 3,259 | $ | 3,824 | ||||
Members' equity |
280,940 | 298,121 | ||||||
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Total liabilities and members' equity |
$ | 284,199 | $ | 301,945 | ||||
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Under the equity method, we do not report the individual assets and liabilities of White Cliffs on our consolidated balance sheets. Instead, our ownership interest is reflected in one line as a noncurrent asset on our consolidated balance sheets.
Certain summarized income statement information of White Cliffs for the year ended December 31, 2011 and the three months ended December 31, 2010 is shown below (in thousands):
Year Ended December 31, 2011 |
(unaudited) Three Months Ended December 31, 2010 |
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Revenue |
$ | 66,097 | $ | 13,619 | ||||
Operating, general and administrative expenses |
12,746 | 3,294 | ||||||
Depreciation and amortization expense |
20,842 | 5,680 | ||||||
Net income |
32,509 | 4,645 |
The equity in earnings of White Cliffs for the year ended December 31, 2011 reported in our consolidated statement of operations is less than 51% of the net income of White Cliffs for the same period. This is due to certain general and administrative expenses we incur in managing the operations of White Cliffs that the other owners are not obligated to share. Such expenses are recorded by White Cliffs, and are allocated to our ownership interests. White Cliffs recorded $3.2 million of such general and administrative expense during the year ended December 31, 2011 and $0.9 million during the three months ended December 31, 2010.
Our ownership percentage of White Cliffs is significant as defined by Securities and Exchange Commission's Regulation S-X Rule 1-02(w). Accordingly, as required by Regulation S-X Rule 3-09, we have included the audited financial statements of White Cliffs as of and for the year ended December 31, 2011 and the unaudited financial statements of White Cliffs as of, and for the three months ended December 31, 2010 as an exhibit to this Form 10-K.
NGL Energy
On November 1, 2011, we acquired 8,932,031 common units representing limited partner interests in NGL Energy (which represents approximately 32.2% of the total 27,715,599 limited partner units of NGL Energy outstanding at December 31, 2011) and a 7.5% interest in the general partner of NGL Energy. As part of this transaction, we agreed to waive our distribution rights on certain of the common units for a specified period of time. We recorded our investment in NGL Energy at the acquisition date fair value, estimated to be $184.0 million. We derived our estimate of the fair value of our limited partner interests in NGL Energy using the closing price of limited partner units on October 31, 2011, adjusted to reflect the waiver of certain distribution rights. At December 31, 2011, the aggregate value of our limited partner interests in NGL Energy was approximately $177.0 million, calculated based on the closing price of the limited partner units on December 30, 2011, adjusted to reflect the waiver of distribution rights on approximately 3.9 million units until the third quarter of 2012.
The excess of the recorded amount of our investment over the book value of our share of the underlying net assets primarily represents equity method goodwill.
At December 31, 2011, the value of our 8,932,031 common units in NGL Energy was $184.3 million, based on a December 30, 2011 closing price of $20.63 per common unit. This does not reflect our 7.5% interest in the general partner of NGL Energy and does not include any valuation adjustment related to our agreement to waive our distribution rights on certain of the common units for a specified period of time. Certain unaudited summarized balance sheet information of NGL Energy is shown below (in thousands):
(unaudited) December 31, 2011 |
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Current assets |
$ | 332,144 | ||
Property plant and equipment, net |
227,893 | |||
Goodwill |
92,930 | |||
Intangible and other assets, net |
102,238 | |||
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Total assets |
$ | 755,205 | ||
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Current liabilities |
$ | 269,073 | ||
Long-term debt |
117,590 | |||
Other noncurrent liabilities |
222 | |||
Partners' equity |
368,320 | |||
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Total liabilities and partners' equity |
$ | 755,205 | ||
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Our policy is to record our equity in earnings of NGL Energy on a one-quarter lag, as we do not expect information on the earnings of NGL Energy to always be available in time to consistently record the earnings in the quarter in which they are generated. Accordingly, we have not recorded any equity in earnings of NGL Energy for the period from November 1, 2011 to December 31, 2011 in our consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2011. Certain unaudited summarized income statement information of NGL Energy for the nine months ended December 31, 2011 is shown below (in thousands):
(unaudited) Nine Months Ended December 31, 2011 |
||||
Revenue |
$ | 871,544 | ||
Operating, general and administrative expenses |
869,143 | |||
Depreciation and amortization expense |
8,480 | |||
Net loss |
(6,079 | ) |
Canadian subsidiaries
On the Petition Date, our Canadian subsidiaries, which included SemCanada Crude, SemCAMS, and SemCanada Energy (collectively, the "Canadian Subsidiaries"), filed applications for creditor protection under the CCAA in Canada. Since the CCAA proceedings were administered in a different jurisdiction than that of our petition for relief under Chapter 11 of the United States Bankruptcy Code, we ceased to control the Canadian Subsidiaries, and accordingly we deconsolidated them on July 22, 2008. We regained control of SemCAMS and SemCanada Crude on the Emergence Date, and consolidated them again on that date.
SemGroup Energy Partners
Near the Petition Date, we lost control of SemGroup Energy Partners when certain creditors exercised their right to designate the members of the board of directors of its general partner. Also during 2008, SemGroup Holdings, L.P. ("SemGroup Holdings"), a wholly-owned subsidiary that held our ownership interests in SemGroup Energy Partners, filed for bankruptcy protection. SemGroup Holdings' bankruptcy case was administered separately from our bankruptcy case, and therefore we deconsolidated SemGroup Holdings and SemGroup Energy Partners. During 2009, creditors seized all of our ownership interests in SemGroup Energy Partners. SemGroup Holdings has not emerged from bankruptcy.
|
6. | DISPOSALS AND IMPAIRMENTS OF LONG-LIVED ASSETS |
Year Ended December 31, 2011 (Successor)
Gains (losses) recorded during the year ended December 31, 2011 related to the disposal or impairment of long-lived assets included the following (in thousands):
Event |
Segment | Pre-Tax Gain (Loss) |
||||
Contribution of SemStream assets to NGL Energy (a) |
SemStream | $ | 44,266 | |||
SemStream residential division impairment (b) |
SemStream | (8,684 | ) | |||
SemLogistics goodwill impairment (c) |
SemLogistics | (44,663 | ) |
(a) | On November 1, 2011, we contributed certain assets and liabilities of our SemStream segment to NGL Energy. On that date these assets and liabilities had the net book values (in thousands) below. However, these values were subject to post closing adjustments, which have since been completed, and resulted in a $2.1 million working capital adjustment. |
Inventory |
$ | 107,858 | ||
Other current assets |
11,263 | |||
Property plant and equipment |
47,756 | |||
Goodwill |
50,071 | |||
Other intangible assets |
12,408 | |||
Other noncurrent assets |
2,818 | |||
Other current liabilities |
(2,947 | ) | ||
Other noncurrent liabilities |
(172 | ) | ||
|
|
|||
Net assets contributed |
$ | 229,055 | ||
|
|
In return for this contribution, we received $93.0 million of cash and ownership interests in NGL Energy and its general partner with an estimated fair value of $184.0 million. We recorded a gain of $44.3 million on this transaction, which includes the impact of a $2.1 million working capital adjustment and the write-off of $1.6 million of software. Additionally, $2.2 million of capitalized loan fees were written-off as a result of long-term debt payments made from the proceeds of this transaction.
(b) | We test all of our goodwill for impairment as of October 1 of each year. Upon completing this impairment test for 2011, we concluded that the goodwill and other intangible assets attributable to the Arizona residential business of our SemStream segment (which was not contributed to NGL Energy) were impaired. To calculate the impairment loss, we estimated the fair value of this reporting unit using the present value of estimated future cash flows, discounted at a rate of 9.4%, and recorded a full impairment of the $3.6 million balance of goodwill and the $5.0 million balance of other intangible assets associated with customer relationships. No impairment was recorded related to the regulated assets of the Arizona residential business in accordance with FASB ASC Topic 980 – Regulated Operations. |
(c) | High crude oil prices and backwardated market conditions in 2011 had a negative effect on SemLogistic's storage economics. As a result, the demand for storage is depressed and SemLogistics has had difficulty securing contract renewals. SemLogistics successfully passed the initial 2011 goodwill impairment test. However, a review of the sensitivity of the test results indicated that a ten percent reduction in the estimated revenue in 2012 and 2013 would result in a test failure. In addition, we received notice in late January 2012 from two customers that their intentions were not to renew their storage contracts upon expiration. These notifications, coupled with the sensitivity of the test results to loss of revenue, led us to conclude that impairment of the goodwill of SemLogistics was required. Accordingly, we impaired the full amount of goodwill which was $44.7 million at October 1, 2011. |
Year Ended December 31, 2010 (Successor)
Losses recorded during the year ended December 31, 2010 related to the disposal or impairment of long-lived assets included the following (in thousands):
Event |
Segment | Loss | ||||
SemCanada Crude impairment (a) |
Corporate and other | $ | (91,756 | ) | ||
Deconsolidation of White Cliffs (b) |
SemCrude | (6,828 | ) | |||
SemMexico goodwill impairment (c) |
SemMexico | (8,863 | ) |
(a) |
During the year ended December 31, 2010, we revised downward our projections of the future earnings potential of the SemCanada Crude segment, following a significant loss of customers, coupled with a significant decline in profitability and an assessment by a national consultancy firm that certain market conditions that are adversely impacting this segment were likely to continue. In response to these events, we tested SemCanada Crude's goodwill and other intangible assets for impairment as of May 31, 2010.
During December 2010, we completed the sale of the property, plant and equipment of the SemCanada Crude segment. The proceeds from the sale were not significantly different than the net book value of the assets sold. Certain marketing operations in the Northern United States that were previously conducted with the participation of the SemCanada Crude segment are now being conducted in their entirety by the SemCrude segment, and the remaining operations of the SemCanada Crude segment were wound down. |
(b) | As described in Note 5, we sold a portion of our ownership interests in White Cliffs during September 2010. We received $140.8 million of proceeds from these transactions, which were used to make principal payments on long-term debt. These proceeds may be adjusted upward upon final resolution of certain post-closing adjustments. |
Accounts receivable |
$ | 4,625 | ||
Other current assets |
143 | |||
Property, plant and equipment, net |
237,506 | |||
Goodwill |
17,000 | |||
Other intangible assets |
43,267 | |||
Accounts payable and accrued liabilities |
(3,736 | ) | ||
Payables to affiliates |
(659 | ) | ||
|
|
|||
Net assets |
$ | 298,146 | ||
|
|
(c) | We test goodwill for impairment as of October 1 of each year. Upon completing this impairment test for 2010, we concluded that the goodwill attributable to our SemMexico segment was impaired, due primarily to a decline in demand for asphalt resulting from a slowdown in road construction. To calculate the impairment loss, we estimated the fair value of the SemMexico segment using the present value of estimated future cash flows, discounted at a rate of 13.84%. |
Month ended December 31, 2009 (Successor)
During December 2009, SemCAMS committed to a plan to cease processing sour gas at one of its facilities, based on the decision by a customer to send its sour gas to a different SemCAMS processing facility. SemCAMS recorded a reduction of $18.4 million to the value of property, plant and equipment, and a $4.7 million increase to the related asset retirement obligation.
Eleven months ended November 30, 2009 (Predecessor)
Gains (losses) recorded during the eleven months ended November 30, 2009 related to the disposal or impairment of long-lived assets included the following (in thousands):
Event |
Segment | Gain (Loss) |
||||
Impairment of natural gas gathering and processing assets (a) |
SemGas | $ | (13,625 | ) | ||
Loss of SemGroup Energy Partners (b) |
Corporate and other | 613,918 | * | |||
Settlement with SemGroup Energy Partners (c) |
SemCrude | (11,677 | )* |
* | Reported within reorganization items in the consolidated statement of operations |
(a) | We had certain natural gas gathering and processing assets that were idle or had a low volume of activity. We analyzed these assets and concluded that they were not likely to become significantly utilized unless market conditions improved, and accordingly we recorded an impairment to reduce these assets to estimated net realizable value. This impairment reduced property, plant and equipment by $7.6 million and reduced other intangible assets by $6.0 million. |
(b) | As described in Note 5, our ownership interests in SemGroup Energy Partners were seized by creditors. Our investment balance in SemGroup Energy Partners was in a liability position, due in part to deferred gains on previous sales of limited partner interests. |
(c) | We reached an agreement with SemGroup Energy Partners to settle a variety of outstanding matters. As part of this settlement, we surrendered property, plant and equipment with a net book value of $11.7 million. |
|
7. | DISCONTINUED OPERATIONS |
SemFuel, SemMaterials, and SemEuro Supply are classified as discontinued operations in the consolidated statements of operations. During 2008, we decided to sell the assets of SemMaterials and to cease the operations of SemEuro Supply, due to their losses from operations and high working capital requirements. During 2009, we decided to sell the assets of SemFuel, due to its high working capital requirements. By December 31, 2009, the majority of the assets of SemMaterials and SemFuel had been sold.
Certain summarized information on the results of discontinued operations is shown below (in thousands):
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||
External revenue |
$ | — | $ | — | $ | 2,335 | $ | 114,591 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gain on disposal of long-lived assets, net |
$ | — | $ | — | $ | — | $ | 16,846 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations before income taxes |
$ | (8 | ) | $ | 2,668 | $ | 215 | $ | (141,586 | ) | ||||||||
Income tax expense |
2 | 234 | — | 27 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations, net of income taxes |
$ | (10 | ) | $ | 2,434 | $ | 215 | $ | (141,613 | ) | ||||||||
|
|
|
|
|
|
|
|
Gains (losses) on disposal of long-lived assets classified as discontinued operations included the following for the eleven months ended November 30, 2009 (in thousands):
Event |
Proceeds | Net Book Value |
Gain (Loss) |
|||||||||
Sale of SemFuel terminals (a) |
$ | 64,332 | $ | 53,119 | $ | 11,213 | ||||||
Sale of SemFuel retail assets (b) |
1,665 | 538 | 1,127 | |||||||||
Sale of SemFuel storage tank (c) |
2,900 | 6,030 | (3,130 | ) | ||||||||
Sale of SemMaterials intellectual property (d) |
6,500 | — | 6,500 | |||||||||
Sale of investment in Vulcan (e) |
3,900 | 8,043 | (4,143 | ) | ||||||||
Sale of SemMaterials residual fuel division (f) |
2,500 | — | 2,500 | |||||||||
Sale of various SemMaterials assets (g) |
6,077 | 3,298 | 2,779 |
(a) | We sold substantially all of the SemFuel refined product terminal assets in September 2009. |
(b) | We sold the assets of SemFuel's retail petroleum business in November 2009. |
(c) | Represents the sale of a product storage tank owned by SemFuel. |
(d) | Represents the sale of SemMaterials intellectual property and laboratory equipment. |
(e) | SemMaterials sold its 50% interest in an asphalt marketing business. |
(f) | Represents the sale of the SemMaterials residual fuel division. |
(g) | Represents the sale or disposal of the remaining assets of SemMaterials through a series of transactions. |
|
8. | REORGANIZATION |
On July 22, 2008, we, and many of our subsidiaries, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code and applications for creditor protection under the CCAA in Canada. On October 22, 2008, two more of our subsidiaries filed petitions for protection under the U.S. Bankruptcy Code. During the reorganization process, certain claims against us in existence prior to the filing of the petitions for relief under the federal bankruptcy laws were stayed while we continued business operations as a debtor-in-possession. We received approval from the court to pay or otherwise honor certain of our obligations incurred before the Petition Date. The court also approved our use of cash on hand at the Petition Date and cash subsequently generated through business operations to meet our post Petition Date obligations. The court also authorized us to obtain debtor-in-possession financing.
While in bankruptcy, we filed a Plan of Reorganization with the court, which was confirmed on October 28, 2009. The Plan of Reorganization determined, among other things, how pre-Petition Date obligations would be settled, our equity structure upon emergence, and our financing arrangements upon emergence.
Determination of reorganization value
An essential element in negotiating a reorganization plan with the various classes of creditors is the determination of reorganization value by the parties in interest. In the event that the parties in interest cannot agree on the reorganization value, the court may be called upon to determine the reorganization value of the entity before a plan of reorganization can be confirmed.
During the reorganization process, a reorganization value was proposed. This reorganization value was ultimately agreed to by the creditors and confirmed by the court. The proposed reorganization value was determined by applying the following valuation methods:
|
a "guideline company" approach, in which valuation multiples observed from industry participants were considered and comparisons were made between our expected performance relative to other industry participants to determine appropriate multiples to apply our financial metrics; |
|
analysis of recent transactions involving companies determined to be similar to us; and |
|
a calculation of the present value of our estimated future cash flows. |
After completing this analysis, the reorganization value was determined to be $1.5 billion. This proposed reorganization value was determined using numerous projections and assumptions. These estimates are subject to significant uncertainties, many of which are beyond our control, including, but not limited to, the following:
|
changes in the economic environment; |
|
changes in supply or demand for petroleum products; |
|
changes in prices of petroleum products; |
|
our ability to successfully implement expansion projects; |
|
our ability to improve relationships with customers and suppliers, as these relationships were adversely impacted by the bankruptcy filing; |
|
our ability to renew certain business operations that were limited during the bankruptcy due to limitations on access to capital; and |
|
our ability to manage the additional costs associated with being a public company. |
The use of different estimates could have resulted in a materially different proposed reorganization value, and there can be no assurance that actual results will be consistent with the estimates that were used to determine the proposed reorganization value. The reorganization value confirmed by the court was utilized in the application of fresh-start reporting.
Valuation of assets and liabilities
We recorded individual assets and liabilities based on their fair values at the Emergence Date and adjusted deferred tax liabilities where appropriate to reflect the change in the financial reporting basis of assets. We recorded approximately $188.8 million of goodwill, which represented the excess of the reorganization value over the fair value of the identifiable assets.
November 30, 2009 balance sheet
The following table shows the effects of our emergence from bankruptcy on the November 30, 2009 consolidated balance sheet (in thousands):
SemGroup, L.P. (Predecessor) |
Reconsolidation of SemCAMS and SemCanada Crude(a) |
Reorganization Adjustments |
Fresh Start Adjustments |
SemGroup Corporation (Successor) |
||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 793,126 | $ | 132,813 | $ | (858,241 | ) | (b | ) | $ | — | $ | 67,698 | |||||||||||||||
Restricted cash |
15,082 | 15,692 | 182,818 | (c | ) | — | 213,592 | |||||||||||||||||||||
Accounts receivable |
79,392 | 139,712 | (230 | ) | — | 218,874 | ||||||||||||||||||||||
Receivable from affiliates |
86,560 | (84,842 | ) | (1,718 | ) | (d | ) | — | — | |||||||||||||||||||
Inventories |
121,958 | 12,569 | — | 36,521 | (p | ) | 171,048 | |||||||||||||||||||||
Current assets of discontinued operations |
10,593 | — | — | — | 10,593 | |||||||||||||||||||||||
Other current assets |
49,487 | 93,732 | — | 1,785 | (p | ) | 145,004 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total current assets |
1,156,198 | 309,676 | (677,371 | ) | 38,306 | 826,809 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Property, plant and equipment |
707,628 | 202,879 | — | 150,588 | (p | ) | 1,061,095 | |||||||||||||||||||||
Goodwill |
46,729 | 52,787 | — | 89,296 | (p | ) | 188,812 | |||||||||||||||||||||
Other intangible assets |
14,081 | 42,100 | — | 78,271 | (p | ) | 134,452 | |||||||||||||||||||||
Investments in non-consolidated subsidiaries |
102,598 | (29,098 | ) | (73,500 | ) | (e | ) | — | — | |||||||||||||||||||
Note receivable from affiliate |
139,109 | (139,109 | ) | — | — | — | ||||||||||||||||||||||
Other assets, net |
8,574 | 767 | 46,057 | (f | ) | 5,946 | (p | ) | 61,344 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total assets |
$ | 2,174,917 | $ | 440,002 | $ | (704,814 | ) | $ | 362,407 | $ | 2,272,512 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
LIABILITIES AND OWNERS' EQUITY (DEFICIT) |
||||||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||
Accounts payable |
$ | 101,295 | $ | 93,374 | $ | (21,102 | ) | (g | ) | $ | — | $ | 173,567 | |||||||||||||||
Accrued liabilities |
93,188 | 17,143 | (77,938 | ) | (h | ) | (267 | ) | 32,126 | |||||||||||||||||||
Payables to pre-petition creditors |
— | 8,221 | 302,212 | (h | ) | — | 310,433 | |||||||||||||||||||||
Other current liabilities |
25,239 | 454 | — | 4,909 | (p | ) | 30,602 | |||||||||||||||||||||
Current liabilities of discontinued operations |
3,663 | — | 10,559 | (i | ) | — | 14,222 | |||||||||||||||||||||
Current portion of long-term debt |
197,727 | — | (176,734 | ) | (j | ) | — | 20,993 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total current liabilities |
421,112 | 119,192 | 36,997 | 4,642 | 581,943 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Liabilities subject to compromise |
4,707,994 | — | (4,707,994 | ) | (m | ) | — | — | ||||||||||||||||||||
Long-term debt |
90 | — | 514,001 | (j | ) | 267 | 514,358 | |||||||||||||||||||||
Deferred income taxes |
36,802 | 64,096 | — | 4,845 | (q | ) | 105,743 | |||||||||||||||||||||
Other noncurrent liabilities |
2,276 | 32,856 | 16,037 | (k | ) | — | 51,169 | |||||||||||||||||||||
Investment in SemGroup Holdings |
613,918 | — | (613,918 | ) | (l | ) | — | — | ||||||||||||||||||||
Predecessor Equity |
||||||||||||||||||||||||||||
SemGroup, L.P. partners' capital (deficit): |
||||||||||||||||||||||||||||
Partners' capital (deficit) |
(3,597,238 | ) | 223,858 | 3,373,380 | (n | ) | — | — | ||||||||||||||||||||
Accumulated other comprehensive income (loss) |
(11,962 | ) | — | — | 11,962 | (r | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total SemGroup, L.P. partners' capital (deficit) |
(3,609,200 | ) | 223,858 | 3,373,380 | 11,962 | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor Equity |
||||||||||||||||||||||||||||
SemGroup Corporation: |
||||||||||||||||||||||||||||
Common stock |
— | — | 414 | (o | ) | — | 414 | |||||||||||||||||||||
Additional paid in capital |
— | — | 676,269 | (o | ) | 340,995 | (r | ) | 1,017,264 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total SemGroup Corporation equity |
— | — | 676,683 | 340,995 | 1,017,678 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Noncontrolling interests in consolidated subsidiaries |
1,925 | — | — | (304 | ) | (r | ) | 1,621 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total owners' equity (deficit) |
(3,607,275 | ) | 223,858 | 4,050,063 | 352,653 | 1,019,299 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total liabilities and owners' equity (deficit) |
$ | 2,174,917 | $ | 440,002 | $ | (704,814 | ) | $ | 362,407 | $ | 2,272,512 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | As described in Note 5, we regained control of SemCAMS and SemCanada Crude on the Emergence Date. This column reflects the reconsolidation of these entities at November 30, 2009, with their assets and liabilities reported at fair value at that date. |
(b) | Represents disbursements made pursuant to the Plan of Reorganization for distributions to creditors, cash transferred to a restricted account for future distributions to creditors, cure payments resulting from assumption of certain contracts, and the funding of a trust for the benefit of pre-petition creditors. The adjustment to cash also includes the issuance of new debt and the repayment of existing debt. |
(c) | Represents cash set aside for payments to pre-petition creditors in settlement of liabilities subject to compromise. |
(d) | Certain amounts receivable from SemCanada Energy were determined to be uncollectable and were written off. |
(e) | Represents the write-off of our investment in SemCanada Energy. |
(f) | Represents debt issuance costs and deferred charges related to new financing agreements. |
(g) | In the reorganization process, we elected not to cancel certain contracts that were in effect prior to the Petition Date. For the contracts we assumed, we were required to make payments to the other parties on the contracts to cure defaults on the contracts. |
(h) | Payables to pre-petition creditors include accruals for payments to be made to pre-petition creditors in settlement of liabilities subject to compromise. In addition, $77.0 million of liabilities for professional fees and $0.9 million of interest payable were transferred into this account. |
(i) | Pursuant to the Plan of Reorganization, we were obligated to remit funds to pre-petition creditors once SemMaterials and SemFuel sold certain specified inventory and collected certain specified accounts receivable. |
(j) | The net change in long-term debt results from the repayment of debtor-in-possession financing, the refinancing of SemCrude Pipeline and SemLogistics credit facilities, and the issuance of new debt, as summarized below (in thousands):
|
(k) | As described in Note 19, we issued warrants to settle certain liabilities subject to compromise. |
(l) | As described in Note 5, we surrendered all of our ownership interests in SemGroup Energy Partners in the reorganization process. |
(m) | Upon filing for bankruptcy protection, certain claims against us were stayed, pending resolution of the amount of consideration the claimants would receive in the reorganization process. We recorded as liabilities subject to compromise our estimate of the total amount of valid claims that were expected not to be paid in full. Liabilities subject to compromise were settled or extinguished in the reorganization process. |
(n) | Reflects the gain on extinguishment of debt and the cancellation of partnership interests in SemGroup, L.P. pursuant to the Plan of Reorganization. |
(o) | SemGroup Corporation issued shares of new common stock in settlement of liabilities subject to compromise. |
(p) | Reflects adjustments to the recorded values of assets and liabilities resulting from fresh-start reporting. |
(q) | Reflects the impact of fresh-start reporting on deferred taxes. |
(r) | Reflects the elimination of SemGroup, L.P.'s accumulated other comprehensive income and the gain on revaluation of assets and liabilities resulting from fresh-start reporting. |
The following table reconciles the reorganization value to the November 30, 2009 equity of the reorganized SemGroup Corporation (in thousands). The November 30, 2009 equity balances of the reorganized SemGroup Corporation include the shares required to be issued in settlement of pre-petition claims as the process of resolving these claims progresses.
Reorganization value |
$ | 1,500,000 | ||
less: SemGroup term loan |
(300,000 | ) | ||
less: SemCrude Pipeline credit facility |
(125,000 | ) | ||
less: SemLogistics credit facility |
(41,285 | ) | ||
less: warrants (Note 19) |
(16,037 | ) | ||
|
|
|||
SemGroup Corporation equity |
$ | 1,017,678 | ||
|
|
The reorganization items gain of the Predecessor shown in the consolidated statement of operations consists of the following for the eleven months ended November 30, 2009 (in thousands):
Gain on extinguishment of debt (a) |
$ | 2,544,218 | ||
Gain on disposal of SemGroup Energy Partners (b) |
613,918 | |||
Gain on asset revaluation in fresh-start reporting (c) |
352,653 | |||
Gain from Canadian plan effects and reconsolidation (d) |
244,281 | |||
Professional fees (e) |
(164,964 | ) | ||
Uncollectable accounts expense (f) |
(38,757 | ) | ||
Loss on settlement with SemGroup Energy Partners (g) |
(11,677 | ) | ||
Employment costs (h) |
(6,706 | ) | ||
Other |
(523 | ) | ||
|
|
|||
Reorganization items gain |
$ | 3,532,443 | ||
|
|
(a) | Represents the gain on the forgiveness of debt pursuant to the Plan of Reorganization. Also includes refinements to the estimated amount of valid claims by pre-petition creditors. During 2008, we recorded an estimate for the total amount of claims subject to compromise. During 2009, we refined this estimate as we reviewed the claims, and reversed some of the amounts that had been accrued in 2008. |
(b) | As described in Note 5, we surrendered all of our ownership interests in SemGroup Energy Partners in the reorganization process. At the time SemGroup Energy Partners was deconsolidated, our investment balance was in a liability position, due in part to deferred gains on previous sales of limited partner interests. |
(c) | As described earlier in this Note, we revalued our assets and liabilities in fresh-start reporting, and recorded a reorganization gain for the increase in fair value of net assets over the previously recorded value. |
(d) | As described earlier in this Note, we reconsolidated SemCAMS and SemCanada Crude on the Emergence Date. The reorganization gain includes the excess of the fair value of SemCAMS and SemCanada Crude upon reconsolidation over the recorded value of our investment in SemCAMS and SemCanada Crude. In addition, the reorganization gain includes the restoration of certain receivables from SemCAMS and SemCanada Crude pursuant to their plans of reorganization.
|
(e) | Professional fees include a variety of services related to the restructuring of the business, including, among others:
|
(f) | Represents the write-off of receivables in situations where we believe the customer non-payment was related to our bankruptcy. This amount includes recovery of certain receivables from SemGroup Energy Partners. |
(g) | We reached an agreement with SemGroup Energy Partners to settle a variety of outstanding matters. As part of this settlement, we surrendered property, plant and equipment with a net book value of $11.7 million. |
(h) | Employment costs include severance related to the termination of employment relationships and bonuses paid to retain personnel during the reorganization process. |
|
9. | CONDENSED COMBINED FINANCIAL STATEMENTS OF U.S. DEBTORS |
The condensed combined financial statements shown below include SemGroup, L.P. and its subsidiaries that filed for bankruptcy in the United States (the "U.S. Debtors"). Transactions and balances between the U.S. Debtors have been eliminated in the condensed combined financial statements below. The condensed combined financial statements below are presented on the same basis as our consolidated financial statements, except as described below.
Condensed combined statement of operations of U.S. Debtors for the eleven months ended November 30, 2009 (in thousands):
Revenue |
$ | 677,046 | ||
Costs of products sold, exclusive of depreciation and amortization |
598,882 | |||
Operating expenses |
64,775 | |||
General and administrative expense |
30,193 | |||
|
|
|||
Operating loss |
(16,804 | ) | ||
Interest expense |
11,189 | |||
Other income, net |
(4,899 | ) | ||
Equity in earnings of subsidiaries other than U.S. Debtors (*) |
(140,516 | ) | ||
Reorganization items gain |
(3,417,712 | ) | ||
|
|
|||
Income from continuing operations |
3,535,134 | |||
Loss from discontinued operations |
(140,550 | ) | ||
|
|
|||
Net income |
$ | 3,394,584 | ||
|
|
(*) | Represents the equity in the earnings of entities that are included in our consolidated statements of operations, but which are not U.S. Debtors. These are accounted for under the equity method in this condensed combined statement of operations of the U.S. Debtors. |
Condensed combined statement of cash flows of U.S. Debtors for the eleven months ended November 30, 2009 (in thousands):
Net cash provided by (used in): |
||||
Operating activities |
$ | (610,832 | ) | |
Investing activities |
28,284 | |||
Financing activities |
14,655 | |||
|
|
|||
Net decrease in cash and cash equivalents |
(567,893 | ) | ||
Cash and cash equivalents, beginning of period |
590,250 | |||
|
|
|||
Cash and cash equivalents, end of period |
$ | 22,357 | ||
|
|
|
10. | SEGMENTS |
As described in Note 1, our businesses are organized based on the nature and location of the services they provide. Certain summarized information related to our reportable segments is shown in the tables below. None of the operating segments have been aggregated, other than White Cliffs Pipeline, which has been included within the Crude segment. Although "corporate and other" does not represent an operating segment, it is included in the tables below to reconcile segment information to that of the consolidated Company. We sold the property, plant and equipment of SemCanada Crude during fourth quarter 2010 and began winding down its operations. SemCanada Crude ceased to be an operating segment during fourth quarter 2010, and is therefore included within "Corporate and other" in the tables below. Eliminations of transactions between segments are also included within "Corporate and other" in the tables below.
The accounting policies of each segment are the same as the accounting policies of the consolidated Company. Transactions between segments are generally recorded based on prices negotiated between the segments. Certain general and administrative and interest expenses incurred at the corporate level were allocated to the segments, based on our allocation policies in effect at the time. During 2010, we completed a detailed study of these expenses and developed a more refined allocation methodology, which we applied to the general and administrative and interest expense allocations for the years ended December 31, 2010 and 2011.
Successor | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2011 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 431,321 | $ | 575,860 | $ | 163,367 | $ | 66,660 | $ | 23,314 | $ | 218,187 | $ | 801 | $ | 1,479,510 | ||||||||||||||||
Intersegment |
— | 46,738 | — | 38,588 | — | — | (85,326 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
431,321 | 622,598 | 163,367 | 105,248 | 23,314 | 218,187 | (84,525 | ) | 1,479,510 | |||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
366,265 | 605,170 | 218 | 75,066 | 152 | 192,068 | (84,764 | ) | 1,154,175 | |||||||||||||||||||||||
Operating |
17,470 | 8,420 | 110,814 | 9,027 | 6,206 | 5,006 | 70 | 157,013 | ||||||||||||||||||||||||
General and administrative |
9,757 | 8,904 | 16,816 | 6,521 | 6,712 | 11,560 | 16,745 | 77,015 | ||||||||||||||||||||||||
Depreciation and amortization |
11,379 | 4,867 | 10,233 | 5,986 | 9,271 | 6,502 | 2,951 | 51,189 | ||||||||||||||||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net |
64 | (36,625 | ) | (8 | ) | 4 | 44,663 | (200 | ) | 1,599 | 9,497 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
404,935 | 590,736 | 138,073 | 96,604 | 67,004 | 214,936 | (63,399 | ) | 1,448,889 | |||||||||||||||||||||||
Earnings from equity method investments |
15,004 | — | — | — | — | — | — | 15,004 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
41,390 | 31,862 | 25,294 | 8,644 | (43,690 | ) | 3,251 | (21,126 | ) | 45,625 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income), net Interest expense |
3,749 | 17,222 | 24,685 | 2,346 | 1,005 | 365 | 10,836 | 60,208 | ||||||||||||||||||||||||
Other expense (income), net |
(1,600 | ) | (2,112 | ) | (2,811 | ) | (10 | ) | 46 | (173 | ) | (8,329 | ) | (14,989 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
2,149 | 15,110 | 21,874 | 2,336 | 1,051 | 192 | 2,507 | 45,219 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 39,241 | $ | 16,752 | $ | 3,420 | $ | 6,308 | $ | (44,741 | ) | $ | 3,059 | $ | (23,633 | ) | $ | 406 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 32,397 | $ | 2,197 | $ | 4,874 | $ | 14,952 | $ | 5,313 | $ | 4,667 | $ | 2,080 | $ | 66,480 | ||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total assets at December 31, 2011 (excluding intersegment receivables) |
$ | 586,882 | $ | 205,394 | $ | 258,306 | $ | 94,960 | $ | 183,179 | $ | 89,239 | $ | 73,221 | $ | 1,491,181 | ||||||||||||||||
Equity investments at December 31, 2011 |
$ | 143,259 | $ | 183,984 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 327,243 |
Successor | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 222,927 | $ | 664,673 | $ | 144,754 | $ | 48,402 | $ | 38,371 | $ | 149,557 | $ | 361,650 | $ | 1,630,334 | ||||||||||||||||
Intersegment |
22,927 | 53,623 | — | 27,388 | — | — | (103,938 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
245,854 | 718,296 | 144,754 | 75,790 | 38,371 | 149,557 | 257,712 | 1,630,334 | ||||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
149,383 | 690,970 | 67 | 50,800 | — | 129,449 | 245,263 | 1,265,932 | ||||||||||||||||||||||||
Operating |
25,498 | 9,074 | 95,072 | 6,342 | 8,406 | 4,742 | 4,306 | 153,440 | ||||||||||||||||||||||||
General and administrative |
10,525 | 9,511 | 18,942 | 6,626 | 5,286 | 10,352 | 25,995 | 87,237 | ||||||||||||||||||||||||
Depreciation and amortization |
27,643 | 6,764 | 9,556 | 5,480 | 7,881 | 6,183 | 7,375 | 70,882 | ||||||||||||||||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net |
6,895 | (35 | ) | (14 | ) | 12 | — | 8,837 | 89,355 | 105,050 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
219,944 | 716,284 | 123,623 | 69,260 | 21,573 | 159,563 | 372,294 | 1,682,541 | ||||||||||||||||||||||||
Earnings from equity method investments |
1,949 | — | — | — | — | — | — | 1,949 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
27,859 | 2,012 | 21,131 | 6,530 | 16,798 | (10,006 | ) | (114,582 | ) | (50,258 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
15,384 | 15,496 | 25,108 | 2,254 | 3,998 | 13 | 23,880 | 86,133 | ||||||||||||||||||||||||
Other expense (income), net |
(1,569 | ) | (2,983 | ) | 617 | (753 | ) | (88 | ) | (199 | ) | 9,313 | 4,338 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
13,815 | 12,513 | 25,725 | 1,501 | 3,910 | (186 | ) | 33,193 | 90,471 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 14,044 | $ | (10,501 | ) | $ | (4,594 | ) | $ | 5,029 | $ | 12,888 | $ | (9,820 | ) | $ | (147,775 | ) | $ | (140,729 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 16,731 | $ | 5,781 | $ | 4,308 | $ | 3,623 | $ | 8,964 | $ | 4,516 | $ | 4,051 | $ | 47,974 | ||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total assets at December 31, 2010 (excluding intersegment receivables) |
$ | 507,909 | $ | 342,475 | $ | 269,958 | $ | 76,048 | $ | 230,789 | $ | 90,264 | $ | 149,745 | $ | 1,667,188 | ||||||||||||||||
Equity investment in White Cliffs at December 31, 2010 |
$ | 152,020 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 152,020 |
Successor | ||||||||||||||||||||||||||||||||
Month Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 11,930 | $ | 59,546 | $ | 12,930 | $ | 4,399 | $ | 3,297 | $ | 12,079 | $ | 53,147 | $ | 157,328 | ||||||||||||||||
Intersegment |
2,085 | 4,477 | — | 2,245 | — | — | (8,807 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
14,015 | 64,023 | 12,930 | 6,644 | 3,297 | 12,079 | 44,340 | 157,328 | ||||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
6,317 | 75,593 | — | 4,495 | 11 | 10,242 | 43,378 | 140,036 | ||||||||||||||||||||||||
Operating |
907 | 1,642 | 11,345 | 921 | 657 | 1,142 | 151 | 16,765 | ||||||||||||||||||||||||
General and administrative |
2,012 | 1,435 | 1,726 | 975 | 575 | 1,310 | (21 | ) | 8,012 | |||||||||||||||||||||||
Depreciation and amortization |
4,937 | 509 | 962 | 427 | 655 | 304 | 997 | 8,791 | ||||||||||||||||||||||||
Loss on disposal or impairment of long-lived assets, net |
— | — | 23,119 | — | — | — | — | 23,119 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
14,173 | 79,179 | 37,152 | 6,818 | 1,898 | 12,998 | 44,505 | 196,723 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
(158 | ) | (15,156 | ) | (24,222 | ) | (174 | ) | 1,399 | (919 | ) | (165 | ) | (39,395 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
3,047 | 1,987 | 1,015 | 358 | 418 | — | 344 | 7,169 | ||||||||||||||||||||||||
Other expense (income), net |
(307 | ) | (3 | ) | (583 | ) | (2 | ) | 6 | (58 | ) | (276 | ) | (1,223 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
2,740 | 1,984 | 432 | 356 | 424 | (58 | ) | 68 | 5,946 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | (2,898 | ) | $ | (17,140 | ) | $ | (24,654 | ) | $ | (530 | ) | $ | 975 | $ | (861 | ) | $ | (233 | ) | $ | (45,341 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 2,037 | $ | 1,752 | $ | 948 | $ | 859 | $ | 724 | $ | 490 | $ | 651 | $ | 7,461 |
Predecessor | ||||||||||||||||||||||||||||||||
Eleven Months Ended November 30, 2009 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 256,931 | $ | 402,553 | $ | — | $ | 39,099 | $ | 33,393 | $ | 167,063 | $ | 2,196 | $ | 901,235 | ||||||||||||||||
Intersegment |
— | 26,306 | — | 16,131 | — | — | (42,437 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
256,931 | 428,859 | — | 55,230 | 33,393 | 167,063 | (40,241 | ) | 901,235 | |||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
178,705 | 425,470 | — | 37,700 | 565 | 144,142 | (42,409 | ) | 744,173 | |||||||||||||||||||||||
Operating expense |
17,716 | 9,006 | — | 9,002 | 7,186 | 3,983 | 414 | 47,307 | ||||||||||||||||||||||||
General and |
7,436 | 5,410 | — | 4,371 | 4,353 | 7,129 | 15,549 | 44,248 | ||||||||||||||||||||||||
Depreciation and amortization |
10,878 | 4,813 | — | 8,296 | 8,615 | 2,942 | 3,430 | 38,974 | ||||||||||||||||||||||||
Loss on disposal or impairment of long- |
— | — | — | 13,625 | — | — | — | 13,625 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
214,735 | 444,699 | — | 72,994 | 20,719 | 158,196 | (23,016 | ) | 888,327 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
42,196 | (15,840 | ) | — | (17,764 | ) | 12,674 | 8,867 | (17,225 | ) | 12,908 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
6,292 | 2,174 | — | 739 | 627 | — | 2,209 | 12,041 | ||||||||||||||||||||||||
Other expense (income), net |
(1,643 | ) | — | — | (92 | ) | (3,009 | ) | (772 | ) | (3,176 | ) | (8,692 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
4,649 | 2,174 | — | 647 | (2,382 | ) | (772 | ) | (967 | ) | 3,349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before reorganization items and income taxes |
$ | 37,547 | $ | (18,014 | ) | $ | — | $ | (18,411 | ) | $ | 15,056 | $ | 9,639 | $ | (16,258 | ) | $ | 9,559 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 45,645 | $ | 3,399 | $ | — | $ | 11,516 | $ | 9,523 | $ | 14,112 | $ | 5,651 | $ | 89,846 |
Income tax expense (benefit) relates to the following segments (in thousands):
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||
SemCAMS |
$ | 552 | $ | 886 | $ | (6,899 | ) | $ | — | |||||||||
SemLogistics |
(3,331 | ) | 2,244 | (459 | ) | 4,192 | ||||||||||||
SemMexico |
629 | 259 | (72 | ) | 2,118 | |||||||||||||
Corporate and other |
(266 | ) | (9,612 | ) | 221 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||||
|
|
|
|
|
|
|
|
|
11. | INVENTORIES |
Inventories consist of the following (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Natural gas and natural gas liquids |
$ | 570 | * | $ | 104,134 | * | ||
Crude oil |
21,803 | 18,608 | ||||||
Asphalt and other |
10,688 | 7,104 | ||||||
|
|
|
|
|||||
$ | 33,061 | $ | 129,846 | |||||
|
|
|
|
* | The significant decrease in natural gas and natural gas liquids from December 31, 2010 to December 31, 2011 is due to the contribution of assets from our SemStream segment to NGL Energy. |
|
12. | OTHER ASSETS |
Other current assets consist of the following (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Product prepayments |
$ | 2,396 | $ | 3,761 | ||||
Other prepaid expenses |
18,685 | 16,255 | ||||||
Margin deposits |
596 | * | 14,884 | |||||
Derivative assets |
162 | 4,368 | ||||||
|
|
|
|
|||||
Total other current assets |
$ | 21,839 | $ | 39,268 | ||||
|
|
|
|
* | The decrease in margin deposits from December 31, 2010 to December 31, 2011 is primarily due to the contribution of assets from our SemStream segment to NGL Energy. $12.6 million of the $14.3 million decrease is due to the contribution of assets to NGL Energy. |
Other noncurrent assets consist of the following (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Debt issuance costs, net |
$ | 6,642 | * | $ | 23,435 | * | ||
Other |
5,923 | 6,740 | ||||||
|
|
|
|
|||||
Total other noncurrent assets, net |
$ | 12,565 | $ | 30,175 | ||||
|
|
|
|
* | See Note 17 for discussion of debt issuance costs. |
|
13. | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment consists of the following (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Land |
$ | 50,329 | $ | 52,765 | ||||
Pipelines and related facilities |
208,175 | 162,472 | ||||||
Storage and terminal facilities |
221,072 | 299,333 | ||||||
Natural gas gathering and processing facilities |
247,768 | 236,308 | ||||||
Linefill |
13,003 | 18,200 | ||||||
Office and other property and equipment |
32,980 | 20,151 | ||||||
Construction-in-progress |
54,788 | 38,077 | ||||||
|
|
|
|
|||||
Property, plant and equipment, gross |
828,115 | 827,306 | ||||||
Accumulated depreciation |
(84,880 | ) | (45,491 | ) | ||||
|
|
|
|
|||||
Property, plant and equipment, net |
$ | 743,235 | $ | 781,815 | ||||
|
|
|
|
SemGroup Corporation recorded depreciation expense of $46.5 million for the year ended December 31, 2011, $54.7 million for the year ended December 31, 2010, and $4.6 million for the month ended December 31, 2009. SemGroup, L.P. recorded depreciation expense from continuing operations of $36.9 million for the eleven months ended November 30, 2009.
We include within the cost of property, plant and equipment interest costs incurred while an asset is being constructed. SemGroup Corporation capitalized $1.0 million of interest costs during the year ended December 31, 2011 and $0.4 million during the year ended December 31, 2010. SemGroup, L.P. capitalized $2.6 million of interest costs during the eleven months ended November 30, 2009.
|
14. | GOODWILL AND OTHER INTANGIBLE ASSETS |
Goodwill
Goodwill relates to the following segments (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
SemStream |
$ | — | $ | 53,707 | ||||
SemLogistics |
— | 44,220 | ||||||
SemMexico |
9,453 | 9,896 | ||||||
|
|
|
|
|||||
Total |
$ | 9,453 | $ | 107,823 | ||||
|
|
|
|
In addition to the amounts in the table above, approximately $2.9 million of our investment in NGL Energy and its general partner and approximately $8.7 million of our investment in White Cliffs represent equity method goodwill. Our estimate of the amount of our investment in NGL Energy and its general partner that represents equity method goodwill is subject to change, as we have not yet completed a detailed valuation analysis of the underlying assets.
As described in Note 3, we test goodwill for impairment annually, or more often if circumstances warrant. To perform these tests, we must determine which asset groups the goodwill relates to (such asset groups are referred to as reporting units). SemLogistics and SemMexico each represent a separate reporting unit.
For the October 1, 2011 goodwill impairment tests, we developed estimates of cash flows for each reporting unit for a period of time ranging from 9 to 15 years, and also developed an estimated terminal value using an assumed 3% growth rate (except for the SemStream residential division, for which we assumed a terminal growth rate of 0%). We discounted the estimated cash flows to present value using a weighted average cost of capital of 13.9% for SemMexico and 9.4% for the other reporting units.
Changes in goodwill balances during the period from November 30, 2009 to December 31, 2011 are shown below (in thousands):
Balance, November 30, 2009 (Successor) |
$ | 188,812 | ||
Currency translation adjustments |
(1,968 | ) | ||
|
|
|||
Balance, December 31, 2009 (Successor) |
186,844 | |||
Impairments (Note 6) |
(61,173 | ) | ||
Deconsolidation of White Cliffs (Note 5) |
(17,000 | ) | ||
Currency translation adjustments |
(848 | ) | ||
|
|
|||
Balance, December 31, 2010 (Successor) |
107,823 | |||
Impairments (Note 6) |
(47,804 | ) | ||
Contribution of SemStream assets to NGL Energy (Note 5) |
(50,071 | ) | ||
Currency translation adjustments |
(495 | ) | ||
|
|
|||
Balance, December 31, 2011 (Successor) |
$ | 9,453 | ||
|
|
For U.S. federal income tax purposes, all of the goodwill recorded upon emergence from bankruptcy is being amortized on a straight-line basis over a 15-year period with the exception of goodwill on the SemStream assets contributed to NGL Energy.
Other intangible assets
Other intangible assets relate to the following segments (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
SemStream |
$ | — | $ | 19,679 | ||||
SemMexico |
8,907 | 12,539 | ||||||
Corporate and other |
43 | 46 | ||||||
|
|
|
|
|||||
Total |
$ | 8,950 | $ | 32,264 | ||||
|
|
|
|
Changes in other intangible asset balances subsequent to the Emergence Date are shown below (in thousands):
Balance, November 30, 2009 (Successor) |
$ | 134,452 | ||
Amortization |
(4,218 | ) | ||
Currency translation adjustments |
378 | |||
|
|
|||
Balance, December 31, 2009 (Successor) |
$ | 130,612 | ||
Amortization |
(16,181 | ) | ||
Impairment (Note 6) |
(39,446 | ) | ||
Deconsolidation of White Cliffs (Note 5) |
(43,267 | ) | ||
Currency translation adjustments |
546 | |||
|
|
|||
Balance, December 31, 2010 (Successor) |
$ | 32,264 | ||
Amortization |
(4,664 | ) | ||
Contribution of SemStream assets to NGL Energy (Note 5) |
(12,408 | ) | ||
Impairment (Note 6) |
(5,048 | ) | ||
Currency translation adjustments |
(1,194 | ) | ||
|
|
|||
Balance, December 31, 2011 (Successor) |
$ | 8,950 | ||
|
|
Our other intangible assets consist primarily of customer relationships and unpatented technology of our SemMexico segment, which represented $6.0 million and $2.5 million respectively of the balance at December 31, 2011. These assets may be subject to impairments in the future if we are unable to maintain the relationships with the customers to which the assets relate.
Prior to the Emergence Date, intangible assets were generally amortized on a straight-line basis over the expected period of benefit. Subsequent to the Emergence Date, intangible assets are generally amortized on an accelerated basis over the estimated period of benefit. SemGroup, L.P. recorded intangible asset amortization expense from continuing operations of $2.1 million for the eleven months ended November 30, 2009. We estimate that future amortization of other intangible assets will be as follows (in thousands):
For year ending: |
||||
December 31, 2012 |
$ | 2,017 | ||
December 31, 2013 |
1,676 | |||
December 31, 2014 |
1,332 | |||
December 31, 2015 |
1,060 | |||
December 31, 2016 |
847 | |||
Thereafter |
2,018 | |||
|
|
|||
Total estimated amortization expense |
$ | 8,950 | ||
|
|
|
15. | FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF RISK |
Fair value of financial instruments
We record certain financial assets and liabilities at fair value at each balance sheet date. The tables below summarize the balances of these assets and liabilities at December 31, 2011 and 2010 (in thousands):
Successor | ||||||||||||||||||||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting* | Total | Level 1 | Level 2 | Level 3 | Netting* | Total | |||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||
Commodity derivatives |
$ | 393 | $ | — | $ | — | $ | (231 | ) | $ | 162 | $ | 97,857 | $ | 1,993 | $ | 2,499 | $ | (97,981 | ) | $ | 4,368 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total assets |
$ | 393 | $ | — | $ | — | $ | (231 | ) | $ | 162 | $ | 97,857 | $ | 1,993 | $ | 2,499 | $ | (97,981 | ) | $ | 4,368 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||||||||||||||
Commodity derivatives |
$ | 231 | $ | — | $ | — | $ | (231 | ) | $ | — | $ | 101,563 | $ | 7,494 | $ | 3,046 | $ | (97,981 | ) | $ | 14,122 | ||||||||||||||||||
Warrants |
12,180 | — | — | — | 12,180 | — | — | 17,192 | — | 17,192 | ||||||||||||||||||||||||||||||
Interest rate swaps |
— | 358 | — | — | 358 | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total liabilities |
$ | 12,411 | $ | 358 | $ | — | $ | (231 | ) | $ | 12,538 | $ | 101,563 | $ | 7,494 | $ | 20,238 | $ | (97,981 | ) | $ | 31,314 | ||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net assets (liabilities) at fair value |
$ | (12,018 | ) | $ | (358 | ) | $ | — | $ | — | $ | (12,376 | ) | $ | (3,706 | ) | $ | (5,501 | ) | $ | (17,739 | ) | $ | — | $ | (26,946 | ) | |||||||||||||
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|
|
* | Relates primarily to exchange traded futures. Gain and loss positions on multiple contracts are settled net on a daily basis with the exchange. |
"Level 1" measurements were obtained using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. These include commodity futures contracts that are traded on an exchange. These also include common stock warrants (Note 19), beginning in September 2011, when the warrants began to be traded on the New York Stock Exchange.
"Level 2" measurements use as inputs market observable and corroborated prices for similar commodity derivative contracts. Assets and liabilities classified as Level 2 include over-the-counter (OTC) traded forwards contracts and swaps.
"Level 3" measurements were obtained using information from a pricing service and internal valuation models incorporating observable and unobservable market data. These include commodity derivatives, such as forwards and swaps for which there is not a highly liquid market, and therefore are not included in Level 2 above. Level 3 measurements also included common stock warrants until September 2011, when the warrants began to be traded on the New York Stock Exchange. Prior to that point, we used a Black-Scholes pricing model to estimate the fair value of the warrants.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value levels.
The following table summarizes changes in the fair value of our net financial assets (liabilities) classified as Level 3 in the fair value hierarchy (in thousands):
Successor | Predecessor | |||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||||||||||||||||||||||||||
Warrants | Commodity Derivatives |
Total | Warrants | Commodity Derivatives |
Total | Warrants | Commodity Derivatives |
Total | Commodity Derivatives |
|||||||||||||||||||||||||||||||||
Net assets (liabilities)—beginning balance |
$ | (17,192 | ) | $ | (547 | ) | $ | (17,739 | ) | $ | (16,909 | ) | $ | (23,438 | ) | $ | (40,347 | ) | $ | (16,037 | ) | $ | (15,663 | ) | $ | (31,700 | ) | $ | 11,324 | |||||||||||||
Transfers out of Level 3(*) |
8,934 | (419 | ) | 8,515 | — | 4,072 | 4,072 | — | — | — | — | |||||||||||||||||||||||||||||||
Total realized and unrealized gain (loss) included in earnings(**) |
8,258 | 2,783 | 11,041 | (283 | ) | (5,351 | ) | (5,634 | ) | (872 | ) | (5,372 | ) | (6,244 | ) | (34,390 | ) | |||||||||||||||||||||||||
Settlements |
— | (1,817 | ) | (1,817 | ) | — | 24,170 | 24,170 | — | (2,403 | ) | (2,403 | ) | 10,610 | ||||||||||||||||||||||||||||
Fresh-start and plan effect adjustments |
— | — | — | — | — | — | — | — | (19,244 | ) | ||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Net assets (liabilities)—ending balance |
$ | — | $ | — | $ | — | $ | (17,192 | ) | $ | (547 | ) | $ | (17,739 | ) | $ | (16,909 | ) | $ | (23,438 | ) | $ | (40,347 | ) | $ | (31,700 | ) | |||||||||||||||
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|||||||||||||||||||||||
Amount of total gain or loss included in earnings for the period attributable to the change in unrealized gain or loss relating to assets and liabilities still held at the reporting date |
$ | — | $ | — | $ | — | $ | (283 | ) | $ | (547 | ) | $ | (830 | ) | $ | (872 | ) | $ | (10,222 | ) | $ | (11,094 | ) | $ | (13,158 | ) |
(*) | In these tables transfers in and transfers out are recognized as of the beginning of the reporting period for commodity derivatives and as of the transfer date for warrants. |
(**) | Gains and losses related to commodity derivatives are reported in product revenue, gains and losses related to warrants are recorded in other expense (income), and gains and losses related to fresh-start and plan effect adjustments are recorded in reorganization items gain (loss) in the consolidated statements of operations. |
Commodity derivative contracts
Our consolidated results of operations and cash flows are impacted by changes in market prices for petroleum products. This exposure to commodity price risk is managed, in part, by entering into various commodity derivatives.
We seek to manage the price risk associated with our marketing operations by limiting our net open positions through (i) the concurrent purchase and sale of like quantities of crude oil to create back-to-back transactions that are intended to lock in positive margins based on the timing, location or quality of the crude oil purchased and delivered or (ii) derivative contracts. Our storage and transportation assets also can be used to mitigate location and time basis risk. All marketing activities are subject to our comprehensive risk management policy, which establishes limits in order to manage risk and mitigate financial exposure.
As described in Note 5, we contributed the primary operating assets of SemStream to NGL Energy on November 1, 2011, including all of SemStream's commodity derivatives. Prior to November 1, 2011, SemStream managed commodity price risk by limiting its net open positions subject to outright price risk and basis risk resulting from grade, location or time differences. SemStream did so by selling and purchasing similar quantities of natural gas liquids with purchase and sale transactions for current or future delivery, by entering into future delivery and purchase obligations with futures contracts or other commodity derivatives and employing its storage and transportation assets. SemStream at times hedged its natural gas liquids commodity price exposure with derivatives on commodities other than natural gas liquids due to the limited size of the market for natural gas liquids derivatives. In addition, physical transaction sale and purchase strategies were intended to lock in positive margins for SemStream, e.g., the sales price was sufficient to cover purchase costs, any other fixed and variable costs and SemStream's profit. All marketing activities were subject to our risk management policy, which establishes limits to manage risk and mitigate financial exposure.
Our commodity derivatives were comprised of swaps, future contracts, and forward contracts of crude oil and natural gas liquids. These are defined as follows:
Swaps—Over the counter transactions where a floating price, basis or index is exchanged for a fixed (or a different floating) price, basis, or index at a preset schedule in the future according to an agreed-upon formula.
Futures contracts—Exchange traded contracts to buy or sell a commodity. These contracts are standardized by the exchange in terms of quality, quantity, delivery period and location for each commodity.
Forward contracts—Over the counter contracts to buy or sell a commodity at an agreed upon future date. The buyer and seller agree on specific terms (price, quantity, delivery period, and location) and conditions at the inception of the contract.
The following table sets forth the notional quantities for derivative instruments entered into (amounts in thousands of barrels):
Successor | ||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
|||||||
Sales |
18,869 | 16,227 | ||||||
Purchases |
18,572 | 14,955 |
We have not designated any of our commodity derivative instruments as accounting hedges. We record the fair value of our commodity derivative instruments on our consolidated balance sheets in other current assets and other current liabilities in the following amounts (in thousands):
Successor |
||||||||||||
December 31, 2011 |
December 31, 2010 | |||||||||||
Other |
Other Current Liabilities |
Other Current Assets |
Other Current Liabilities |
|||||||||
$162 | $ | — | $ | 4,368 | $ | 14,122 |
Realized and unrealized gains (losses) from our commodity derivatives were recorded to product revenue in the following amounts (in thousands):
Successor |
Predecessor | |||||||
Year Ended |
Year Ended |
Month Ended |
Eleven Months | |||||
$2,153 | $(11,969) | $(13,589) | $(32,268) |
Interest rate swaps
As described in Note 17, we entered into certain interest swaps during February 2011. The swaps are recorded at fair value in other noncurrent liabilities on the consolidated balance sheet, with changes in the fair value (net of income taxes) recorded to other comprehensive income (loss).
Concentrations of risk
During the year ended December 31, 2011, no individual customer accounted for more than 10% of our consolidated revenue. At December 31, 2011, one customer of the SemCrude segment accounted for approximately 16% of our consolidated accounts receivable.
During the year ended December 31, 2010, no individual customer accounted for more than 10% of our consolidated revenue.
During the month ended December 31, 2009, our continuing operations generated approximately $15.8 million of revenue from one customer of the SemStream segment, which represented approximately 11% of our consolidated revenue from continuing operations. At December 31, 2009, no individual customer accounted for more than 10% of our consolidated accounts receivable.
During the eleven months ended November 30, 2009, we generated approximately $178.4 million in revenue from one customer of the Crude segment, which represented approximately 20% of our consolidated revenue from continuing operations. Approximately 17% of our consolidated costs of products sold were purchased from one of the Crude segment's suppliers.
Assets and liabilities of subsidiaries outside the United States
The following table summarizes the assets and liabilities (excluding affiliate balances) at December 31, 2011 of our subsidiaries outside the United States (amounts in thousands):
Canada | United Kingdom |
Mexico | Total | |||||||||||||
Cash and cash equivalents |
$ | 47,791 | $ | 9,964 | $ | 8,754 | $ | 66,509 | ||||||||
Other current assets |
63,418 | 2,836 | 29,979 | 96,233 | ||||||||||||
Noncurrent assets |
167,513 | 170,371 | 50,506 | 388,390 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
278,722 | 183,171 | 89,239 | 551,132 | ||||||||||||
Current liabilities |
$ | 33,480 | $ | 23,979 | $ | 23,374 | $ | 80,833 | ||||||||
Noncurrent liabilities |
80,282 | 33,686 | 4,258 | 118,226 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
113,762 | 57,665 | 27,632 | 199,059 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net assets |
$ | 164,960 | $ | 125,506 | $ | 61,607 | $ | 352,073 | ||||||||
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|
|
|
|
Employees
At December 31, 2011, we had approximately 710 employees, including approximately 480 employees outside the U.S. Approximately 106 of the employees in Canada and Mexico are represented by labor unions and are subject to collective bargaining agreements. Of these employees, approximately 55 are subject to collective bargaining agreements that will expire in 2012 and approximately 51 expiring in 2013.
|
16. | INCOME TAXES |
Prior to the Emergence Date, we generally did not record a provision for U.S. federal or state income taxes since SemGroup, L.P. was a partnership and was not subject to such taxes. Upon emergence from bankruptcy, we became a corporation and are now subject to U.S. federal and state income taxes. Our subsidiaries based in Canada, the United Kingdom, and Mexico have been subject to income taxes in those jurisdictions throughout the period of these financial statements.
As described in Note 5, SemCAMS and SemCanada Crude were deconsolidated from the Petition Date through the Emergence Date. Amounts shown for income (loss) from continuing operations before income taxes and for provision (benefit) for income taxes in the following tables do not include SemCAMS and SemCanada Crude for the eleven months ended November 30, 2009.
Income tax expense (benefit)
Our consolidated income (loss) from continuing operations before income taxes was generated in the following jurisdictions (in thousands):
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
U.S. |
$ | 30,292 | $ | (35,242 | ) | $ | (18,478 | ) | $ | 3,488,471 | ||||||
Foreign |
(29,886 | ) | (105,487 | ) | (26,863 | ) | 53,531 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated |
$ | 406 | $ | (140,729 | ) | $ | (45,341 | ) | $ | 3,542,002 | ||||||
|
|
|
|
|
|
|
|
The following table summarizes income tax expense (benefit) from continuing operations by jurisdiction (in thousands):
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
Current income tax provision (benefit): |
||||||||||||||||
Foreign |
$ | 7,427 | $ | 7,376 | $ | (2,518 | ) | $ | (53,182 | ) | ||||||
U.S. federal |
— | — | — | — | ||||||||||||
U.S. state |
4 | 120 | 106 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
7,431 | 7,496 | (2,412 | ) | (53,182 | ) | |||||||||||
Deferred income tax provision (benefit): |
||||||||||||||||
Foreign |
(7,252 | ) | (16,570 | ) | (5,146 | ) | 59,492 | |||||||||
U.S. federal |
(2,251 | ) | 2,450 | 311 | — | |||||||||||
U.S. state |
(344 | ) | 401 | 38 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
(9,847 | ) | (13,719 | ) | (4,797 | ) | 59,492 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision (benefit) for income taxes |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||
|
|
|
|
|
|
|
|
The following table reconciles income tax provision (benefit) at the U.S. federal statutory rate to the consolidated provision (benefit) for income taxes (in thousands):
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 406 | $ | (140,729 | ) | $ | (45,341 | ) | $ | 3,542,002 | ||||||
U.S. federal statutory rate |
35 | % | 35 | % | 35 | % | 35 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision at statutory rate |
142 | (49,255 | ) | (15,869 | ) | 1,239,701 | ||||||||||
State income taxes—net of federal benefit |
(221 | ) | 339 | 93 | — | |||||||||||
Effect of rates other than statutory |
(1,360 | ) | 2,447 | (7,151 | ) | (4,226 | ) | |||||||||
Effect of U.S. taxation on foreign branches |
(10,460 | ) | (36,920 | ) | — | — | ||||||||||
Foreign tax adjustment |
— | — | (1,442 | ) | (10,595 | ) | ||||||||||
Impairment of goodwill |
15,745 | 21,411 | — | — | ||||||||||||
Partnership income not subject to tax provision |
— | — | — | (1,218,570 | ) | |||||||||||
Foreign tax credit and offset to branch deferreds |
9,339 | 13,392 | (99,190 | ) | — | |||||||||||
Impact of valuation allowance on deferred tax assets |
(13,152 | ) | 38,184 | 115,418 | — | |||||||||||
Other, net |
(2,449 | ) | 4,179 | 932 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision for income taxes |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||
|
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For the eleven months ended November 30, 2009, SemGroup, L.P. was a partnership and, therefore, was not subject to U.S. federal and state income taxes. For the month ended December 31, 2009 and the years ended December 31, 2010 and 2011, the foreign subsidiaries are disregarded entities for U.S. federal income tax purposes. The foreign earnings are taxed in foreign jurisdictions as well as in the U.S. Foreign tax credits, subject to limitations, are available to reduce U.S. taxes.
Deferred tax positions
Deferred income taxes reflect the effects of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. Significant components of deferred tax assets and liabilities are as follows at December 31, 2011 and 2010 (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
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Deferred tax assets: |
||||||||
Net operating loss and other credit carryforwards |
$ | 43,009 | $ | 34,625 | ||||
Compensation and benefits |
1,606 | 3,334 | ||||||
Unrealized gain/(loss) |
93 | — | ||||||
Inventories |
48 | 729 | ||||||
Intangible assets |
56,328 | 40,212 | ||||||
Pension plan |
4,541 | 3,398 | ||||||
Allowance for doubtful accounts |
2,189 | 5,573 | ||||||
Deferred revenue |
7,281 | 7,267 | ||||||
Foreign tax credit and offset to branch deferreds |
77,293 | 84,969 | ||||||
Other |
6,798 | 5,984 | ||||||
less: valuation allowance |
(148,945 | ) | (162,202 | ) | ||||
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Net deferred tax assets |
50,241 | 23,889 | ||||||
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Deferred tax liabilities: |
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Intangible assets |
(9,069 | ) | (12,582 | ) | ||||
Prepaid expenses |
(142 | ) | (109 | ) | ||||
Unrealized gain/(loss) |
— | (2,497 | ) | |||||
Property, plant and equipment |
(76,957 | ) | (90,803 | ) | ||||
Equity Investment in partnerships |
(28,696 | ) | (1,658 | ) | ||||
Other |
(8,586 | ) | (1,379 | ) | ||||
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Total deferred tax liabilities |
(123,450 | ) | (109,028 | ) | ||||
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Net deferred tax assets (liabilities) |
$ | (73,209 | ) | $ | (85,139 | ) | ||
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At December 31, 2011, we had a cumulative U.S. federal net operating loss of approximately $105.5 million that can be carried forward to apply against taxable income generated in future years. This carry forward begins to expire in 2029. We had U.S. capital losses of approximately $4.3 million and cumulative U.S. state net operating losses of approximately $80.9 million available for carry forward, which begin to expire in 2014.
Due to our emergence from bankruptcy and overall restructuring, we have recorded a valuation allowance on deferred tax assets. This valuation allowance decreased by $13.2 million in 2011 due primarily to a net increase in the amount of certain liabilities that have been considered as a source of future taxable income in establishing the amount of the valuation allowance. We have not yet been able to benefit from the net operating loss and foreign tax credit carry forwards above the extent of these liabilities. The current year net increase in the deferred tax liabilities results primarily from non-recognition of the gain recorded on the SemStream segment transaction as described in Note 6.
We have analyzed filing positions in all of the federal, state and foreign jurisdictions where we are required to file income tax returns and determined that no accruals related to uncertainty in tax positions are required. All income tax years of the company ending after the Emergence Date remain open for examination in all jurisdictions. In foreign jurisdictions, all tax years within the revelant statute of limitations for periods prior to the Emergence Date remain open for examination.
Income taxable to partners prior to Emergence Date
Prior to the Emergence Date, SemGroup L.P.'s earnings were allocated to its general and limited partners, who were responsible for any related U.S. federal and state income taxes. Net earnings for financial statement purposes may have differed significantly from taxable income reportable to the partners, due to differences between the tax basis and financial reporting basis of assets and liabilities and also due to the taxable income allocation requirements under SemGroup, L.P.'s partnership agreement.
Individual partners had different investment bases, depending upon timing and price of the acquisition of partnership interests. Further, each partner's tax accounting, which was dependent upon the partner's tax position, may have differed from the accounting followed in the consolidated financial statements. Accordingly, there could be significant differences between each individual partner's tax basis and the partner's share of the net assets reported in the consolidated financial statements. We do not have access to information about each individual partner's tax attributes, and the aggregate tax basis cannot be readily determined.
In addition to federal income taxes, partners may have been subject to other taxes, such as state and local taxes, foreign federal and local taxes and unincorporated business taxes that may have been imposed by the various jurisdictions in which SemGroup, L.P. conducted business or owned property. Furthermore, partners may have been required to file foreign federal income tax returns, pay foreign income taxes, file state income tax returns and pay taxes in various states.
Pro forma income tax provision (unaudited)
We estimate that, had we become a taxable corporation on January 1, 2009, the Predecessor's provision for income taxes would have been $1.2 billion for the eleven months ended November 30, 2009. This estimated pro forma income tax provision assumes that the gain on extinguishment of debt in the reorganization process would have been a taxable event. The pro forma tax provision was calculated by applying an assumed U.S. federal and state income tax rate of 35.53% to actual historical income before income taxes, taking into account estimated permanent differences. The pro forma tax provision may not be indicative of the results that actually would have occurred if we had become a taxable corporation on January 1, 2009 or the results that may occur in the future.
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17. | LONG-TERM DEBT |
Our long-term debt consisted of the following (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
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SemGroup corporate revolving credit facility |
$ | 82,000 | $ | — | ||||
Previous SemGroup corporate credit facilities |
— | 324,065 | ||||||
Rose Rock credit facility |
— | — | ||||||
SemLogistics credit facility |
23,180 | 24,289 | ||||||
SemMexico credit facility |
4,046 | — | ||||||
Capital leases |
109 | 89 | ||||||
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Total long-term debt |
109,335 | 348,443 | ||||||
less: current portion of long-term debt |
26,058 | 12 | ||||||
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Noncurrent portion of long-term debt |
$ | 83,277 | $ | 348,431 | ||||
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SemGroup corporate credit agreement
During June 2011, we entered into a new credit agreement that consisted of a revolving facility, a Term Loan A and a Term Loan B. We used the proceeds from the new credit facilities to retire our previous revolving credit facility and term loan, which we had entered into upon emergence from bankruptcy. Later in 2011, we retired the Term Loan A and Term Loan B on the new credit facility, using proceeds from the contribution of SemStream assets to NGL Energy, proceeds from the Rose Rock IPO and borrowings on the revolving credit facility.
The revolving credit facility has a capacity of $320 million at December 31, 2011. This capacity may be used either for cash borrowings or letters of credit, although the maximum letter of credit capacity is $250 million. At December 31, 2011, we had outstanding cash borrowings of $82 million on this facility and outstanding letters of credit of $12.5 million. The principal is due on June 20, 2016, and any letters of credit expire on June 13, 2016. Earlier principal payments may be required if we enter into certain transactions to sell assets or obtain new borrowings. We have the right to make additional principal payments without incurring any penalties for early repayment.
Interest on revolving credit cash borrowings is charged at either a Eurodollar rate or an alternate base rate, at our election.
The Eurodollar rate is calculated as:
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the London Interbank Offered Rate ("LIBOR") for U.S. dollar deposits adjusted for currency requirements; plus |
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a margin that can range from 2.5% to 4.0%, depending on a leverage ratio specified in the agreement. |
The alternate base rate is calculated as:
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the greater of i) the U.S. Prime Rate, ii) the Federal Funds Effective Rate plus 0.5%, or iii) one-month LIBOR plus 1%; plus |
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a margin that can range from 1.5% to 3.0%, depending on a leverage ratio specified in the agreement. |
At December 31, 2011, there was $82 million of outstanding revolving cash borrowings, $75 million of which incurred interest at the Eurodollar rate and $7 million of which incurred interest at the alternate base rate. The interest rate in effect at December 31, 2011 on the $75 million of Eurodollar rate borrowings was 3.16%, calculated as LIBOR of 0.28% plus a margin of 2.875%. The interest rate in effect at December 31, 2011 on the $7 million of alternate base rate borrowings was 5.125%, calculated as the prime rate of 3.25% plus a margin of 1.875%.
At each interest payment date, we have the option of electing whether interest will be charged at the Eurodollar rate or at the alternate base rate for the following interest period. If we elect the alternate base rate, the following interest payment date will be at the end of the calendar quarter. If we elect the Eurodollar rate, we may elect for the next interest payment date to occur after one, two, three, or six months, or any other period acceptable to the lenders.
Fees are charged on any outstanding letters of credit at a rate that ranges from 2.5% to 4.0%, depending on a leverage ratio specified in the credit agreement. At December 31, 2011, the rate in effect was 2.875%. In addition, a fronting fee of 0.25% is charged on outstanding letters of credit. A commitment fee of 0.5% is charged on any unused capacity on the revolving credit facility. In addition, we are charged an annual administrative fee of $0.1 million. We also paid $11.9 million of fees to lenders and advisors, $5.2 million of which is attributable to the revolving credit agreement, and which was recorded in other noncurrent assets and is being amortized over the life of the agreement. The remaining $6.7 million of these fees were attributable to the term loans, and were fully amortized during 2011.
We recorded interest expense related to the new SemGroup revolving credit facility of $2.8 million for the year ended December 31, 2011, including amortization of debt issuance costs. We recorded interest expense related to the SemGroup Term Loans A and B of $13.1 million for the year ended December 31, 2011, including amortization of debt issuance costs.
The credit agreement includes customary affirmative and negative covenants, including limitations on the creation of new indebtedness, liens, sale and lease-back transactions, new investments, making fundamental changes including mergers and consolidations, making of dividends and other distributions, making material changes in our business, modifying certain documents and maintenance of a consolidated leverage ratio and an interest coverage ratio. In addition, the credit agreement prohibits any commodity transactions that are not permitted by our Comprehensive Risk Management Policy.
The credit agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the credit agreement from time to time, including in respect of letter of credit disbursement obligations, inaccuracy of representations and warranties in any material respect when made or when deemed made, violation of covenants, cross payment-defaults to any material indebtedness, cross acceleration to any material indebtedness, bankruptcy and insolvency events, the occurrence of a change of control, certain unsatisfied judgments, certain ERISA events, certain environmental matters and certain assertions of or actual invalidity of certain loan documents. A default under the credit agreement would permit the participating banks to terminate commitments, require immediate repayment of any outstanding loans with interest and any unpaid accrued fees, and require the cash collateralization of outstanding letter of credit obligations.
The credit agreement restricts our ability to make certain types of payments related to our capital stock, including the declaration or payment of dividends. The credit agreement is guaranteed by all of our material domestic subsidiaries (except for Rose Rock Midstream Holdings, L.L.C.) and secured by a lien on substantially all of our property and assets, subject to customary exceptions. At December 31, 2011, we were in compliance with the terms of the credit agreement.
As a condition upon the closing and effectiveness of the Rose Rock revolving credit facility, SemGroup Corporation agreed to reduce its revolving racility commitment to $300 million within 30 days following the closing of Rose Rock's IPO.
Previous SemGroup Corporation term loan and revolving credit facilities
Pursuant to the Plan of Reorganization, on November 30, 2009, we entered into a revolving credit facility and a term loan. We retired these facilities in June 2011 upon entering into a new credit agreement (described above). The revolving credit facility included capacity for cash borrowings and letters of credit.
We paid $27 million in fees to the lenders at the inception of the agreement, which we recorded in other noncurrent assets and amortized over the life of the agreement.
Interest on revolving cash borrowings was charged at a floating rate, which was calculated as 5.5% plus whichever of the following yielded the highest rate: a) the Federal Funds Effective Rate plus 0.5%; b) the Prime Rate; c) the three-month LIBOR rate plus 1.5%, or d) 2.5%. In addition, a facility fee of $0.4 million was charged each year.
The facility included a fee that was payable at maturity. Interest was charged on this fee at a floating rate, which was calculated as 7.0% plus the greater of LIBOR or 1.5%.
Certain of the letters of credit were prefunded. Fees were charged on this prefunded tranche at a range of 7.0% to 8.5%. Fees on additional outstanding letters of credit were charged at a rate of 7.0%.
Fees ranging from 1.5% to 2.5% were charged on any lender commitments that we did not utilize.
Interest was charged on the term loan at a rate of 9%. We had the option under certain circumstances to defer interest on the term loan; when we selected this option, interest was charged during that period at a rate of 11%.
We recorded interest expense related to these facilities of $39.3 million during the year ended December 31, 2011, $71.5 million during the year ended December 31, 2010, and $5.7 million during the month ended December 31, 2009. Included in interest expense is the amortization of debt issuance costs of $22.2 million for the year ended December 31, 2011 (which includes a $17.4 million reduction due to the refinancing of the credit facility) and $23.6 million for the year ended December 31, 2010.
Rose Rock credit facility
On November 10, 2011, our subsidiary Rose Rock entered into a senior secured revolving credit facility agreement. This credit facility became effective upon completion of the Rose Rock IPO on December 14, 2011. This credit agreement provides for a revolving credit facility of $150 million. The agreement also provides that the revolving credit facility may, under certain conditions, be increased by up to $200 million. The credit facility includes a $75 million sub-limit for the issuance of letters of credit for the account of Rose Rock or its loan parties. All amounts outstanding under the facility will be due and payable on December 14, 2016.
At Rose Rock's option, amounts borrowed under the credit agreement will bear interest at either the Eurodollar rate or an alternate base rate ("ABR"), plus, in each case, an applicable margin. Until the date the financial statements relating to the first quarter after the effective date of the credit agreement have been delivered, the applicable margin relating to any Eurodollar loan will be 2.25% and with respect to any ABR loan will be 1.25%. After such financial statements have been delivered, the applicable margin will range from 2.25% to 3.25% in the case of a Eurodollar rate loan, and from 1.25% to 2.25% in the case of an ABR loan, in each case, based on a leverage ratio. At December 31, 2011, there were no revolving cash borrowings.
Fees are charged on any outstanding letters of credit at a rate that ranges from 2.25% to 3.25%, depending on a leverage ratio specified in the credit agreement. At December 31, 2011, there were $22.6 million in outstanding letters of credit, and the rate in effect was 2.25%. In addition, a fronting fee of 0.25% is charged on outstanding letters of credit.
A commitment fee that ranges from 0.375% to 0.50%, depending on a leverage ratio specified in the credit agreement, is charged on any unused capacity of the revolving credit facility. In addition, we are charged an annual administrative fee of $0.1 million. The credit facility also allows for the use of Secured Bilateral Letters of Credit. At December 31, 2011, we had $17.0 million of Bilateral Letters of Credit outstanding and the interest rate in effect was 1.75%.
We recorded $0.1 million of interest expense during December 2011 related to this facility, including amortization of debt issuance costs.
The credit agreement includes customary representations and warranties and affirmative and negative covenants. The covenants in the agreement include limitations on creation of new indebtedness and liens, entry into sale and lease-back transactions, investments, and fundamental changes including mergers and consolidations, dividends and other distributions, material changes in Rose Rock's business and modifying certain documents. The agreement also requires the maintenance of a specified consolidated leverage ratio
and an interest coverage ratio. In addition, the agreement prohibits any commodity transactions that are not permitted by Rose Rock's Comprehensive Risk Management Policy.
The credit agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the agreement from time to time, including in respect of letter of credit disbursement obligations, inaccuracy of representations and warranties in any material respect when made or when deemed made, violation of covenants, cross payment-defaults of Rose Rock and its restricted subsidiaries to any material indebtedness, cross acceleration to any material indebtedness, bankruptcy and insolvency events, the occurrence of a change of control, certain unsatisfied judgments, certain ERISA events, certain environmental matters and certain assertions of or actual invalidity of certain loan documents. A default under the Rose Rock credit agreement would permit the participating banks to terminate commitments, require immediate repayment of any outstanding loans with interest and any unpaid accrued fees, and require the cash collateralization of outstanding letter of credit obligations.
The credit agreement restricts Rose Rock's ability to make certain types of payments relating to its capital stock, including the declaration or payment of dividends; provided that Rose Rock may make quarterly distributions of available cash so long as no default under the agreement then exists or would result therefrom. The agreement is:
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guaranteed by all of Rose Rock's material domestic subsidiaries; and |
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secured by a lien on substantially all of the property and assets of Rose Rock and the guarantors, subject to customary exceptions. |
At December 31, 2011, we were in compliance with the terms of the credit agreement.
SemLogistics credit facilities
SemLogistics entered into a credit agreement in December 2010, which includes a £15 million term loan and a £15 million revolving credit facility (U.S. $23.2 million each, at the December 31, 2011 exchange rate). The proceeds from this new facility were used to retire SemLogistics' previous credit facility.
The revolving credit facility can be utilized either for cash borrowings or letters of credit. The number of cash borrowings may not exceed five at any point in time and the number of outstanding letters of credit may not exceed ten at any point in time. At December 31, 2011, no cash borrowings were outstanding under the revolving facility and no letters of credit were utilized.
Interest is charged on both the term loan and the revolving loans (including letters of credit) at a floating rate, which is calculated as LIBOR plus a margin that ranges from 1.75% to 2.5%, depending on whether SemLogistics meets certain financial ratios specified in the agreement. The interest rate in effect at December 31, 2011 was 2.84%, which was calculated as 1.75% plus the LIBOR rate of 1.09%. Interest on the term loan and revolving facility are payable quarterly. A commitment fee of 0.50% is charged on any unused commitments under the facility and is payable quarterly. In addition, SemLogistics paid fees of $1.3 million upon inception of the facility, which were recorded to other noncurrent assets and are being amortized over the life of the facility.
During February 2011, we entered into three interest swap agreements. The intent of the swaps is to offset a portion of the variability in interest payments due under the term loan. The swaps require us to pay a fixed rate of 2.49% on a combined notional amount of £7.5 million (which declines during the final year of the swap until it reaches £7.0 million) each quarter through March 31, 2014. The swaps entitle us to receive a floating rate equal to LIBOR on the same notional amount.
Failure to comply with the provisions of the credit agreement could cause events of default, which could result in increases in interest rates, the debt becoming due and payable, or other adverse consequences. The events of default include the failure to pay fees, interest, or principal when due, a breach of any material representation or warranty contained in the credit agreement, a breach of certain covenants, any default under any of the agreements entered into in connection with the loan, bankruptcy, judgments and attachments, any event of default under our other credit agreements, default events relating to employee benefit plans, the guarantees, or collateral documents or the credit agreement failing to be in full force and effect or being declared null and void, or the occurrence of an event that is reasonably likely to have a material adverse effect on our ability to meet our obligations under the facility. In addition, cross acceleration will occur if we do not pay any other debt facility.
SemLogistics used the proceeds from the term loan to retire its previous credit agreement, which it had entered into on November 30, 2009. The previous facility bore interest at a floating rate, which was calculated as LIBOR plus a margin ranging from 5.5% to 6.0%. In addition, SemLogistics paid $2.1 million of fees to the lender at the inception of the agreement.
SemLogistics recorded interest expense of $1.0 million for the year ended December 31, 2011, $4.0 million for the year ended December 31, 2010, and $0.4 million for the month ended December 31, 2009, including amortization of debt issuance costs. SemLogistics recorded the fair value of the interest swaps as a noncurrent liability of $0.4 million at December 31, 2011, with a corresponding adjustment to other comprehensive income (net of income taxes).
At December 31, 2011, the outstanding balance of the SemLogistics credit facility has been classified as a current liability as we have committed to the banks to terminate the credit facility by March 31, 2012. The interest rate swaps will be terminated with an expected loss on closure of £250,000 (U.S. $0.4 million at the December 31, 2011 exchange rate). At December 31, 2011, unamortized capitalized loan fees of $0.8 million were included in other assets, net on the consolidated balance sheet.
At December 31, 2011, we were in compliance with the terms of the credit agreement.
SemCrude Pipeline credit facility
SemCrude Pipeline, L.L.C. ("SemCrude Pipeline"), which is a wholly-owned subsidiary that holds our ownership interest in White Cliffs, borrowed $125 million under a credit agreement on November 30, 2009. SemCrude Pipeline retired this facility during September 2010.
Interest was generally charged on the SemCrude Pipeline credit facility at a floating rate, which was calculated as 6% plus the greater of LIBOR or 1.5%. In addition, we paid $4.8 million in fees to the lender at the inception of the agreement, which have been fully amortized. We recorded interest expense related to this facility of $11.0 million during the year ended December 31, 2010 and $1.1 million for the month ended December 31, 2009.
SemMexico facilities
During 2010, SemMexico entered into a credit agreement that allowed SemMexico to borrow up to 80 million Mexican pesos at any time through June 2011. Borrowings on this facility are required to be repaid with monthly payments through May 2013. At December 31, 2011, borrowings of 56.7 million pesos (U.S. $4.0 million) were outstanding on this facility.Borrowings are unsecured and bear interest at the bank prime rate in Mexico plus 1.5%. At December 31, 2011, the interest rate in effect was 6.31%, calculated as 1.5% plus the bank prime rate of 4.81%.
SemMexico also has outstanding letters of credit of 210 million Mexican pesos at December 31, 2011 (U.S. $15.0 million). Fees are generally charged on outstanding letters of credit at a rate of 0.40% for 196 million Mexican pesos (U.S. $14.0 million) in letters of credit and 1.0% for 14 million Mexican pesos (U.S. $1.0 million) in letters of credit.
During 2011, SemMexico entered into an additional credit agreement that allows SemMexico to borrow up to 56 million Mexican pesos (U.S. $4.0 million at the December 31, 2011 exchange rate) at any time during the term of the facility, which matures in August 2012. Borrowings would be unsecured and would bear interest at the bank prime rate in Mexico plus 1.7%.
SemMexico recorded interest expense of $0.4 million during the year ended December 31, 2011 related to these facilities.
At December 31, 2011, we were in compliance with the terms of these facilities.
Scheduled principal payments
The following table summarizes the scheduled principal payments as of December 31, 2011 (in thousands). As described above, our credit agreements require accelerated principal payments under certain circumstances. As a result, principal payments may occur earlier than shown in the table below.
SemGroup Facility |
Rose Rock Facility |
SemLogistics Facility |
SemMexico Facility |
Capital Leases |
Total | |||||||||||||||||||
For the year ended: |
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December 31, 2012 |
$ | — | $ | — | $ | 23,180 | $ | 2,857 | $ | 21 | $ | 26,058 | ||||||||||||
December 31, 2013 |
— | — | — | 1,189 | 21 | 1,210 | ||||||||||||||||||
December 31, 2014 |
— | — | — | — | 21 | 21 | ||||||||||||||||||
December 31, 2015 |
— | — | — | — | 21 | 21 | ||||||||||||||||||
December 31, 2016 |
82,000 | — | — | — | 20 | 82,020 | ||||||||||||||||||
Thereafter |
— | — | — | — | 5 | 5 | ||||||||||||||||||
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Total |
$ | 82,000 | $ | — | $ | 23,180 | $ | 4,046 | $ | 109 | $ | 109,335 | ||||||||||||
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Fair value
We estimate that the fair value of our long-term debt was not materially different than the recorded values at December 31, 2011. We estimate that the fair value of our fixed-rate term loan was $316.4 million at December 31, 2010 (compared to a recorded value of $308.7 million) and that the fair value of the other (floating rate) credit agreements approximated their recorded values at December 31, 2010.
Long-term debt prior to Emergence Date
Prior to the Petition Date, SemGroup, L.P. was a borrower on several credit agreements. Substantially all of SemGroup L.P.'s assets were pledged as collateral under these agreements. The bankruptcy petitions and related events caused events of default on all of the credit agreements. In addition, the examiner appointed by the bankruptcy court alleged that certain of SemGroup L.P.'s commodity trading practices prior to the Petition Date may have violated covenants under the credit agreements.
During 2008, while under bankruptcy protection, we obtained a debtor-in-possession credit facility to fund working capital and reorganization costs. We repaid the full balance of this facility at the Emergence Date.
All of the long-term debt prior to the Emergence Date, with the exception of certain capital leases, was repaid, refinanced, or extinguished as part of the reorganization process.
While in bankruptcy, we only recorded interest expense to the extent such interest was expected to be paid. Interest obligations in the amount of $221 million during the eleven months ended November 30, 2009 related to pre-petition credit agreements that were expected to be compromised (i.e., not paid in full) in the reorganization process were not recorded as expenses.
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18. | COMMITMENTS AND CONTINGENCIES |
Bankruptcy matters
(a) | Confirmation order appeals |
Manchester Securities appeal. On October 21, 2009, Manchester Securities Corporation, a creditor of SemGroup Holdings, L.P. (one of our subsidiaries), filed an objection to the Plan of Reorganization. In the objection, Manchester argued that the Plan of Reorganization should not be confirmed because it did not provide for an alleged $50 million claim of SemGroup Holdings, L.P. against SemCrude Pipeline, L.L.C. (another of our subsidiaries). On October 28, 2009, the bankruptcy court overruled the objection and entered the confirmation order approving the Plan of Reorganization. On November 4, 2009, Manchester filed a notice of appeal of the confirmation order. On December 4, 2009, Manchester's appeal was docketed in the United States District Court for the District of Delaware. We filed a motion to dismiss the appeal as equitably moot. On February 18, 2011, the District Court granted our motion to dismiss the appeal. On March 22, 2011, Manchester filed a notice to appeal this order. On January 2, 2012, the United States Court of Appeals affirmed the judgment of the District Court to dismiss the appeal. Manchester has not filed a petition for rehearing or a petition for a writ of certiorari with the United States Supreme Court. The deadline for filing a petition for rehearing has passed. The deadline for filing a petition for a writ of certiorari with the Supreme Court is March 2, 2012.
Luke Oil appeal. On October 21, 2009, Luke Oil Company, C&S Oil/Cross Properties, Inc., Wayne Thomas Oil and Gas and William R. Earnhardt Company (collectively, "Luke Oil") filed an objection to the Plan of Reorganization "to the extent that the Plan of Reorganization may alter, impair, or otherwise adversely affect Luke Oil's legal rights or other interests." On October 28, 2009, the bankruptcy court overruled the Luke Oil objection and entered the confirmation order. On November 6, 2009, Luke Oil filed a notice of appeal. On December 23, 2009, Luke Oil's appeal was docketed in the United States District Court for the District of Delaware. We filed a motion to dismiss the appeal as equitably moot. Briefing on this matter is complete, but the motion to dismiss has not been ruled upon by the District Court. While we believe that this action is without merit and are vigorously defending this matter on appeal, an adverse ruling on this action could have a material adverse impact on us.
(b) | Investigations |
Around the time of our bankruptcy filings, several governmental agencies launched investigations regarding the circumstances of the filings. The mandate and scope of these investigations were very broad and the investigations are ongoing.
Bankruptcy examiner. On October 14, 2008, the bankruptcy court appointed an examiner to (i) investigate the circumstances surrounding our trading strategy prior to bankruptcy filings; (ii) investigate the circumstances surrounding certain insider transactions and the formation of SemGroup Energy Partners L.P. (a former subsidiary); (iii) investigate the circumstances surrounding the potential improper use of borrowed funds and funds generated from operations and the liquidation of assets to satisfy margin calls related to our trading strategy and that of certain entities owned or controlled by former officers and directors of the general partner of SemGroup, L.P.; (iv) determine whether any directors, officers or employees of the general partner of SemGroup, L.P. participated in fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of our affairs; and (v) determine whether the SemGroup debtor estates have causes of action against current or former officers, directors, or employees of the general partner of SemGroup, L.P. arising from such participation. The examiner's report was filed with the bankruptcy court on April 15, 2009.
Certain current and prior employees of the general partner of SemGroup, L.P. are referenced in the examiner's report and the report's conclusions may suggest possible civil or criminal liability on their part. To the extent such claims exist, they are property of a litigation trust that was established for the benefit of pre-petition creditors pursuant to the Plan of Reorganization, and are not property of the reorganized SemGroup Corporation. This litigation trust is pursuing claims against certain former officers, at its own expense. We may incur expenses, which are not expected to be material, related to information and document requests of the litigation trust related to such claims. Any indemnification obligations to such officers by SemGroup, L.P. were discharged under the Plan of Reorganization.
SEC. On August 5, 2008 and September 5, 2008, we received requests for voluntary production from the Securities and Exchange Commission ("SEC"). On September 24, 2008, the SEC entered an Order Directing Private Investigation and Designating Officers to Take Testimony that pertains to us. The SEC has also served us with subpoenas dated October 24, 2009, December 11, 2009 and November 15, 2010, seeking further documents and information. We complied with the SEC requests and subpoenas. On November 28, 2011, the staff of the SEC notified us that their investigation had been completed and that they did not intend to recommend any enforcement action by the Commission.
CFTC. On June 19, 2008, we received a request for voluntary production from the Commodity Futures Trading Commission ("CFTC"). Subsequent to the bankruptcy filings, the CFTC sent other requests for voluntary production. The CFTC has also served subpoenas upon us requiring us to produce various documents and for the depositions of our representatives. We continue to comply with the CFTC's requests. We are unaware of any currently pending formal charges against us by the CFTC.
DOJ. On July 15, 2008, we received a subpoena from the Department of Justice ("DOJ") directing us to produce documents responsive to the subpoena. We contacted the DOJ regarding the subpoena and the DOJ verbally voluntarily stayed compliance with the subpoena. We have not produced any documents to the DOJ and, to our knowledge, the DOJ is not currently pursuing any such production. We are unaware of any currently pending formal charges against us by the DOJ.
(c) | Claims reconciliation process |
A large number of parties have made claims against us for obligations alleged to have been incurred prior to our bankruptcy filing. On September 15, 2010, the bankruptcy court entered an order estimating the contingent, unliquidated and disputed claims and authorizing distributions to holders of allowed claims. Pursuant to that order we have begun making distributions to the claimants. We continue to attempt to settle unresolved claims.
Pursuant to the Plan of Reorganization, we committed to settle authorized and allowed bankruptcy claims by paying a specified amount of cash, issuing a specified number of warrants, and issuing a specified number of shares of SemGroup Corporation common stock. We do not believe the resolution of the remaining outstanding claims will exceed the total amount of consideration established under the Plan of Reorganization for all claimants; instead, the resolution of the remaining claims in some cases will impact the relative share of the established pool of common stock and warrants that certain claimants receive.
However, under certain circumstances we could be required to pay additional funds to settle the specified group of claims to be settled with cash. Pursuant to the Plan of Reorganization, a specified amount of restricted cash was set aside at the Emergence Date, which we expect to be sufficient to settle this group of claims. Since the Emergence Date, we have made significant progress in resolving these claims, and we continue to believe that the cash set aside at the Emergence Date will be sufficient to settle these claims. However, we have not yet reached a resolution of all of these claims, and if the total settlement amount of all of these claims exceeds the specified amount, we will be required to pay additional funds to satisfy the total settlement amount for this specified group of claims. If this were to become probable of occurring, we would be required to record a liability and a corresponding expense.
Blueknight claim
Blueknight Energy Partners, L.P. ("Blueknight"), which was formerly a subsidiary of SemGroup, together with other entities related to Blueknight, entered into a Shared Services Agreement on April 7, 2009, with SemCrude, L.P. and SemManagement, L.L.C. (which are currently subsidiaries of SemGroup). The services provided by SemCrude to Blueknight under this agreement included the coordination of movement of crude oil belonging to Blueknight's customers and the operation of Blueknight's Oklahoma pipeline system and its Cushing, Oklahoma terminal. Under the subsequent amendments to the agreements beginning in May 2010, certain of these services were phased out, and Blueknight began to manage the movement of its crude oil and the operation of its Cushing terminal.
In a letter dated August 18, 2011, Blueknight claimed that SemCrude owes Blueknight approximately 141,000 barrels of crude oil. We responded to Blueknight's letter denying their charges and requesting documentation from Blueknight of its claim. We continued to respond to requests for information and to review documentation provided by Blueknight; however, on February 14, 2012, Blueknight filed suit against us, Rose Rock Midstream GP, L.L.C. and Rose Rock Midstream, L.P. in the District Court of Oklahoma County, Oklahoma in connection with this claim. We continue to maintain that there is no basis for their claim and will vigorously defend this matter; however, we cannot reliably predict the outcome.
Other matters
We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our consolidated liabilities may change materially as circumstances develop.
Environmental
We may from time to time experience leaks of petroleum products from our facilities, as a result of which we may incur remediation obligations or property damage claims. In addition, we are subject to numerous environmental regulations. Failure to comply with these regulations could result in the assessment of fines or penalties by regulatory authorities.
The Kansas Department of Health and Environment ("the KDHE") initiated discussions during our bankruptcy proceeding regarding six of our sites in Kansas (five owned by SemCrude and one owned by SemGas) that KDHE believes, based on their historical use, may have soil or groundwater contamination in excess of state standards. KDHE sought our agreement to undertake assessments of these sites to determine whether they are contaminated. We reached an agreement with KDHE on this matter and entered into a Consent Agreement and Final Order with KDHE to conduct environmental assessments on the sites and to pay KDHE's costs associated with their oversight of this matter. We have conducted phase II investigations at all sites. Four of the six sites have limited amounts of soil contamination that will be excavated and/or remediated on site. Four of the six sites appear to have ground water contamination that may require further delineation and/or on-going monitoring. We are preparing work plans to submit to the State of Kansas for approval. We do not anticipate any penalties or fines for these historical sites.
A water pipeline break occurred at a SemCAMS facility during August 2010. This resulted in a spill of material that was predominantly salt water containing a small amount of hydrocarbons. The incident was investigated by Environment Canada and Alberta Environment. On February 14, 2012, charges were filed against SemCAMS by the Federal Government of Canada (Department of Fisheries) and the Province of Alberta (Alberta Environment) in connection with this incident. SemCAMS is summoned to appear in court in Fox Creek, Province of Alberta to respond to the charges. We are currently reviewing the charges and will request disclosure from the agencies in order to determine our response. Although it is not possible to predict the outcome of these proceedings, we accrued a liability for estimated fines and environmental contributions of $0.4 million in December 2010 which we still carry on our books at December 31, 2011.
Asset retirement obligations
We will be required to incur significant removal and restoration costs when we retire our natural gas gathering and processing facilities in Canada. We have recorded a liability associated with these obligations, which is reported within other noncurrent liabilities on the consolidated balance sheets. The following table summarizes the changes in this liability from November 30, 2009 (the date we reconsolidated SemCAMS) through December 31, 2011 (in thousands):
Balance at November 30, 2009 (Successor) |
$ | 23,791 | ||
Accretion |
205 | |||
Changes in estimated timing and amount of payments (Note 6) |
4,738 | |||
Currency translation adjustments |
262 | |||
|
|
|||
Balance at December 31, 2009 (Successor) |
28,996 | |||
|
|
|||
Accretion |
3,523 | |||
Payments made |
(1,144 | ) | ||
Currency translation adjustments |
1,509 | |||
|
|
|||
Balance at December 31, 2010 (Successor) |
32,884 | |||
|
|
|||
Accretion |
4,114 | |||
Payments made |
(341 | ) | ||
Currency translation adjustments |
(771 | ) | ||
|
|
|||
Balance at December 31, 2011 (Successor) |
$ | 35,886 | ||
|
|
The December 31, 2011 liability was calculated using the $105.3 million cost we estimate we would incur to retire these facilities, discounted based on our risk-adjusted cost of borrowing and the estimated timing of remediation.
The calculation of the liability for an asset retirement obligation requires the use of significant estimates, including those related to the length of time before the assets will be retired, cost inflation over the assumed life of the assets, actual remediation activities to be required, and the rate at which such obligations should be discounted. Future changes in these estimates could result in material changes in the value of the recorded liability. In addition, future changes in laws or regulations could require us to record additional asset retirement obligations. The $105.3 million estimated cost represents only our proportionate share of the obligations associated with these facilities. An additional $44.2 million of estimated costs are attributable to third-party owners' proportionate share of the obligations. If an owner fails to perform on its obligations, the other owners (including SemGroup) could be obligated to bear that party's share of the remediation costs.
Our other segments may also be subject to removal and restoration costs upon retirement of their facilities. However, we do not believe the present value of such obligations under current laws and regulations, after taking into account the estimated lives of our facilities, is material to our financial position or results of operations.
Leases
We have entered into capital and operating lease agreements for office space, office equipment, land, trucks and tank storage. Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2011 are as follows (in thousands):
Capital Leases |
Operating Leases |
|||||||
For year ending: |
||||||||
December 31, 2012 |
$ | 21 | $ | 5,185 | ||||
December 31, 2013 |
21 | 4,674 | ||||||
December 31, 2014 |
21 | 2,446 | ||||||
December 31, 2015 |
21 | 1,774 | ||||||
December 31, 2016 |
20 | 1,564 | ||||||
Thereafter |
5 | 7,920 | ||||||
|
|
|
|
|||||
Total future minimum lease payments |
$ | 109 | $ | 23,563 | ||||
|
|
|
|
SemGroup Corporation recorded lease and rental expenses of $9.4 million for the year ended December 31, 2011, $10.6 million for the year ended December 31, 2010 and $1.1 million for the month ended December 31, 2009. SemGroup, L.P. recorded lease and rental expense from continuing operations of $7.5 million for the eleven months ended November 30, 2009.
Purchase and sale commitments
We routinely enter into agreements to purchase and sell petroleum products at specified future dates. We account for these commitments as normal purchases and sales, and therefore we do not record assets or liabilities related to these agreements until the product is purchased or sold. At December 31, 2011, such commitments included the following (in thousands):
At December 31, 2011 | ||||||||
Volume (barrels) |
Value ($) | |||||||
Fixed price purchases |
150 | 13,442 | ||||||
Fixed price sales |
150 | 14,496 | ||||||
Floating price purchases |
32,217 | 3,128,239 | ||||||
Floating price sales |
32,835 | 3,140,511 |
Certain of the commitments shown in the table above relate to agreements to purchase product from a counterparty and to sell a similar amount of product (in a different location) to the same counterparty. Many of the commitments shown in the table above are cancellable by either party, as long as notice is given within the time frame specified in the agreement (generally 30 to 120 days).
In addition, our SemGas segment enters into contracts under which we are responsible for marketing the majority of the gas and natural gas liquids produced by the counterparties to the agreements. In 2011, the majority of SemGas' revenues were generated from such contracts.
|
19. | EQUITY |
Common stock
Upon emergence from bankruptcy, we issued 40,882,496 shares of common stock. The Plan of Reorganization specified that we were to issue an additional 517,500 shares of common stock in settlement of pre-petition claims. As of December 31, 2011, we have issued 182,174 shares of this stock and will issue the remainder as the process of resolving the claims progresses. The owners' equity balances on the consolidated balance sheets include the shares that are required to be issued in settlement of pre-petition claims. The shares of common stock reflected on the consolidated balance sheet at December 31, 2011 are summarized below:
Shares issued on Emergence Date |
40,882,496 | |||
Shares subsequently issued in settlement of pre-petition claims |
182,174 | |||
Remaining shares required to be issued in settlement of pre-petition claims |
335,326 | |||
Issuance of shares under employee and director compensation programs |
419,403 | |||
Shares issued upon exercise of warrants |
7 | |||
|
|
|||
Total shares |
41,819,406 | |||
|
|
|||
Par value per share |
$ | 0.01 | ||
|
|
|||
Common stock on December 31, 2011 balance sheet |
$ | 418,194 | ||
|
|
In addition to the shares in the table above, there are shares of unvested restricted stock outstanding at December 31, 2011. The par value of these shares has not yet been reflected in common stock on the consolidated balance sheet, as these shares have not yet vested. There are also shares of restricted stock that were returned to treasury upon forfeiture. The par value of these shares is not reflected in the consolidated balance sheet, as no accounting recognition is given to forfeited shares.
The common stock includes Class A and Class B stock. Class A stock is eligible to be listed on an exchange, whereas Class B stock is not. Any share of Class B stock may be converted to Class A at the election of the holder. Both classes of stock have full voting rights. Both classes of stock have a par value of $0.01 per share. The total number of shares authorized for issuance is 90,000,000 shares of Class A stock and 10,000,000 shares of Class B stock.
On October 28, 2011, we adopted a limited duration Stockholders Rights Plan (the "Rights Plan") and declared a dividend of one right on each outstanding share of our Class A common stock. Under the Rights Plan, the rights generally will become exercisable only if a person or group acquires beneficial ownership of 10% or more of our Class A common stock in a transaction not approved by our Board of Directors. In that situation, each holder of a right (other than the acquiring person, whose rights will become void and will not be exercisable) will be entitled to purchase, at the then-current price, additional shares of Class A common stock having a value of twice the exercise price of the right. In addition, if we are acquired in a merger or other business combination after an unapproved party acquires more than 10% of our Class A common stock, each holder of the right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company's stock having a value of twice the exercise price of the right. We may redeem the rights for $0.001 per right at any time before an event that causes the rights to become exercisable. Under the Rights Plan's terms, the rights will expire one day after the date of our 2012 Annual Meeting of Stockholders.
Warrants
Upon emergence from bankruptcy protection, we issued 1,634,210 warrants. The Plan of Reorganization specified that we were to issue an additional 544,737 warrants in settlement of the pre-petition claims. As of December 31, 2011, we have issued 191,752 of the warrants and will issue the remainder as the process of resolving the claims progresses. Beginning September 2011, the warrants began trading on the New York Stock Exchange under the ticker symbol, SEMGWS. The warrants reflected on the consolidated balance sheet at December 31, 2011 are summarized below:
Warrants issued on Emergence Date |
1,634,210 | |||
Warrants subsequently issued in settlement of pre-petition claims |
191,752 | |||
Remaining warrants to be issued in settlement of pre-petition claims |
352,985 | |||
Warrants exercised |
(7 | ) | ||
|
|
|||
Total warrants at December 31, 2011 |
2,178,940 | |||
|
|
|||
Fair value per warrant at December 31, 2011 |
$ | 5.59 | ||
|
|
|||
Warrant value included within other noncurrent liabilities on December 31, 2011 consolidated balance sheet |
$ | 12,180,275 | ||
|
|
Each warrant entitles the holder to purchase one share of common stock for $25 at any time before the November 30, 2014 expiration date. Upon exercise, a holder may elect a cashless exercise, whereby the number of shares to be issued to the holder is reduced, in lieu of a cash payment. The closing price of our common stock was $26.06 per share on December 31, 2011. In the event of a change in control of the Company, the holders of the warrants would have the right to sell the warrants to us, and we would have the right to purchase the warrants from the holders. In either case, the price to be paid for the warrants would be calculated using a standard pricing model with inputs specified in the warrants agreement.
|
21. | EQUITY-BASED COMPENSATION |
SemGroup Corporation (Successor) equity awards
We have reserved a total of 2,781,635 shares of common stock for issuance pursuant to employee and director compensation programs. Upon emergence from bankruptcy, we began issuing awards of restricted stock and restricted stock units pursuant to such programs. These awards give the recipients the right to receive shares of common stock, once specified service or performance related vesting conditions are met. We record expense for these awards (and corresponding increases to additional paid-in capital) based on the grant date fair value of the awards. Although these awards are to be settled in shares, we may elect to give participants the option of settling a portion of the awards in cash, to meet statutory minimum tax withholding requirements. The activity related to these awards is summarized below:
Unvested Shares |
Average Grant Date Fair Value(*) |
|||||||
Awards granted - 2009 |
148,533 | $ | 25.00 | |||||
|
|
|||||||
Outstanding at December 31, 2009 |
148,533 | $ | 25.00 | |||||
Awards granted - 2010 |
562,295 | $ | 25.00 | |||||
Awards vested - 2010 |
(92,833 | ) | $ | 25.00 | ||||
Awards forfeited - 2010 |
(115,093 | ) | $ | 25.00 | ||||
|
|
|||||||
Outstanding at December 31, 2010 |
502,902 | $ | 25.00 | |||||
Awards granted - 2011 (**) |
173,982 | $ | 28.90 | |||||
Awards vested - 2011 |
(201,361 | ) | $ | 25.00 | ||||
Awards forfeited - 2011 |
(65,017 | ) | $ | 25.36 | ||||
|
|
|||||||
Outstanding at December 31, 2011 |
410,506 | $ | 26.59 |
(*) | The grant date fair value of awards issued prior to our listing on the New York Stock Exchange was estimated at $25 per share, which was the per share reorganization value of the Company (described in Note 8). |
(**) | For certain of the awards granted in 2011, the number of shares that will vest is contingent upon our achievement of certain specified targets. If we meet the specified maximum targets, approximately 30,000 additional shares could vest. |
The following table summarizes the scheduled vesting of awards that have been granted as of December 31, 2011:
Year ended December 31, 2012 |
158,915 shares | |||
Year ended December 31, 2013 |
107,042 shares | |||
Year ended December 31, 2014 |
174,093 shares |
The awards may be subject to accelerated vesting in the event of involuntary terminations.
The following table summarizes the expense we have recorded and expect to record related to awards that have been granted through December 31, 2011:
Month ended December 31, 2009 |
$ | 233,720 | ||
Year ended December 31, 2010 |
$ | 6,229,920 | ||
Year ended December 31, 2011 |
$ | 5,424,360 | ||
Year ended December 31, 2012 (estimated) |
$ | 4,745,894 | ||
Year ended December 31, 2013 (estimated) |
$ | 1,520,852 | ||
Year ended December 31, 2014 (estimated) |
$ | 1,007,879 |
Restricted stock granted subsequent to December 31, 2011
During first quarter 2012, we granted approximately 131,700 awards of restricted stock and restricted stock units that will vest on January 19, 2015, contingent upon the continued service of the recipients. Also during the first quarter 2012, we granted certain restricted stock awards that will vest in 2015, contingent not only on the continued service of the recipients, but also on our achievement of certain specified targets. The maximum number of these awards that could vest is approximately 128,650 shares, if we meet the specified maximum performance targets.
Retention Awards
During June 2010, we granted retention awards to certain officers and employees, which were scheduled to vest in December 2011, contingent on the continued service of the recipients. Each award had a specified value that was payable either in cash or in shares of SemGroup stock.
We recorded $2.4 million of expense during 2011 and $2.0 million of expense during 2010 related to these retention awards. Upon vesting during 2011, we settled awards with a value of $1.2 million by paying cash, and we settled awards with a value of $3.2 million by issuing 125,212 shares of common stock.
|
22. | EMPLOYEE BENEFIT PLANS |
Defined contribution plans
We sponsor defined contribution retirement plans in which the majority of employees are eligible to participate. SemGroup Corporation's contributions to the defined contribution plans were $1.1 million for the year ended December 31, 2011, $1.3 million for the year ended December 31, 2010, and $0.1 million for the month ended December 31, 2009. SemGroup, L.P.'s contributions to the defined contribution plans related to continuing operations were $1.2 million for the eleven months ended November 30, 2009.
Pension plans
We sponsor a defined benefit pension plan and a supplemental defined benefit pension plan (collectively, the "Pension Plans") for certain employees of the SemCAMS segment. The following table shows the projected benefit obligations and plan assets of the Pension Plans (in thousands):
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Change in projected benefit obligation: |
||||||||
Projected benefit obligation at beginning of year |
$ | 29,182 | $ | 26,475 | ||||
Service cost |
742 | 783 | ||||||
Interest cost |
1,494 | 1,560 | ||||||
Actuarial (gains) losses |
1,247 | 3,096 | ||||||
Benefits paid |
(5,430 | ) | (3,985 | ) | ||||
Currency translation adjustment |
(468 | ) | 1,253 | |||||
|
|
|
|
|||||
Projected benefit obligation at end of year |
26,767 | 29,182 | ||||||
Change in fair value of plan assets: |
||||||||
Fair value of plan assets at beginning of year |
24,063 | 19,959 | ||||||
Employer contributions |
2,903 | 5,186 | ||||||
Actual return on plan assets |
(143 | ) | 1,831 | |||||
Benefits paid |
(5,430 | ) | (3,985 | ) | ||||
Currency translation adjustment |
(385 | ) | 1,072 | |||||
|
|
|
|
|||||
Fair value of plan assets at end of year |
21,008 | 24,063 | ||||||
|
|
|
|
|||||
Funded status: |
$ | (5,759 | ) | $ | (5,119 | ) | ||
|
|
|
|
|||||
Accumulated benefit obligation at end of year |
$ | 25,242 | $ | 25,940 |
To compute the December 31, 2011 projected benefit obligation of the Pension Plans, we used a discount rate of 4.25% and an assumed rate of compensation increase of 3.5%. To compute the December 31, 2010 projected benefit obligation of the Pension Plans, we used a discount rate of 5.25% and an assumed rate of compensation increase of 4%.
We recorded other noncurrent liabilities of $5.8 million at December 31, 2011, and $5.1 million at December 31, 2010, to reflect the funded status of the Pension Plans. We recorded changes in the funded status of the Pension Plans to other comprehensive income (loss), net of income taxes. These amounts were a loss of $1.7 million for the year ended December 31, 2011, a loss of $2.0 million for the year ended December 31, 2010, and a gain of $0.8 million for the month ended December 31, 2009.
The following table summarizes the components of the net periodic benefit cost related to the Pension Plans (in thousands). As described in Note 5, SemCAMS was not consolidated during the eleven months ended November 30, 2009.
Successor | ||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
||||||||||
Service cost |
$ | 742 | $ | 783 | $ | 64 | ||||||
Interest cost |
1,494 | 1,560 | 131 | |||||||||
Expected return on plan assets |
(1,585 | ) | (1,452 | ) | (116 | ) | ||||||
Settlement loss |
703 | 174 | — | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
$ | 1,354 | $ | 1,065 | $ | 79 | ||||||
|
|
|
|
|
|
To compute interest cost, we used discount rates of 5.25%, 6.00% and 5.75% for 2011, 2010 and 2009, respectively. To compute expected return on plan assets, we used an estimated rate of return of 6.75% for 2011 and 7.00% for 2010 and 2009.
We estimate that benefit payments from the Pension Plans will be as follows for the years 2012 – 2021 (in thousands):
Year |
Estimated Benefit Payments |
|||
2012 |
$ | 1,831 | ||
2013 |
1,727 | |||
2014 |
1,716 | |||
2015 |
1,914 | |||
2016 |
2,096 | |||
2017 - 2021 |
9,452 |
We estimate that we will make contributions of $1.1 million to the Pension Plans during the year ended December 31, 2012.
Substantially all of the plan's assets are invested in pooled funds that hold highly-liquid securities. The value of each share of a pooled fund is calculated based on the quoted market prices of the assets held by the fund. The following table shows the value of each category of plan assets at December 31, 2011 and 2010 and the target investment allocation under our investment policy at December 31, 2011:
Asset Value at December 31, 2011 (in thousands) |
Asset Value at December 31, 2010 (in thousands) |
Actual Allocation at December 31, 2011 |
Normal Allocation Per Investment Policy |
Minimum Allocation Per Investment Policy |
Maximum Allocation Per Investment Policy |
|||||||||||||||||||
Cash and cash equivalents |
$ | 101 | $ | 30 | 0 | % | 6 | % | 0 | % | 25 | % | ||||||||||||
Pooled funds—fixed income |
7,986 | 9,170 | 38 | % | 39 | % | 30 | % | 50 | % | ||||||||||||||
Pooled funds—Canadian equities |
6,724 | 8,078 | 32 | % | 30 | % | 20 | % | 50 | % | ||||||||||||||
Pooled funds—non-Canadian equities |
6,197 | 6,785 | 29 | % | 25 | % | 5 | % | 60 | % | ||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 21,008 | $ | 24,063 | ||||||||||||||||||||
|
|
|
|
Our investment policy for plan assets permits investments in a wide variety of assets, including certain types of derivatives. Our policy prohibits investments of plan assets in certain types of assets, including commodities, mineral rights, and collectibles. Our investment policy requires us to maintain an investment allocation within the ranges shown in the table above, and also contains more specific requirements that are designed to achieve an appropriate level of diversification. The fair values of the pension plan's pooled funds are level 2 measurements, while the fair value of the cash and cash equivalents component of plan assets is a level 1 measurement.
Retiree medical plan
We sponsor an unfunded, post-employment health benefit plan (the "Health Plan") for certain employees of the SemCAMS segment. The projected benefit obligation related to the Health Plan was $1.7 million at December 31, 2011 and $1.7 million at December 31, 2010, and is reported within other noncurrent liabilities on the consolidated balance sheets.
Termination benefits
The laws in Canada, the United Kingdom and Mexico require us to pay certain benefits to employees if their employment is terminated without cause. In addition, we entered into agreements with certain employees in the U.S. that would require us to pay benefits to those employees if their employment is terminated without cause before June 2, 2012. We recorded $1.6 million of expense during 2010 and $0.4 million of expense during 2011 for termination benefits related to the wind-down of certain operations of SemCanada Crude.
|
23. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
The following table presents changes in the components of accumulated other comprehensive income (loss) (in thousands):
Currency Translation |
Employee Benefit Plans |
Interest Rate Swaps |
Total | |||||||||||||
Balance, December 31, 2008 (Predecessor) |
$ | (40,071 | ) | $ | — | $ | — | $ | (40,071 | ) | ||||||
Currency translation adjustment |
28,109 | — | — | 28,109 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balances prior to fresh-start reporting |
(11,962 | ) | — | — | (11,962 | ) | ||||||||||
Fresh-start reporting adjustment |
11,962 | — | — | 11,962 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, November 30, 2009 (Successor) |
— | — | — | — | ||||||||||||
Currency translation adjustment |
(4,180 | ) | — | — | (4,180 | ) | ||||||||||
Changes related to benefit plans, net of income tax expense of $287 |
— | 846 | — | 846 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2009 (Successor) |
(4,180 | ) | 846 | — | (3,334 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Currency translation adjustment |
6,475 | — | — | 6,475 | ||||||||||||
Changes related to benefit plans, net of income tax benefit of $687 |
— | (2,026 | ) | — | (2,026 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2010 (Successor) |
2,295 | (1,180 | ) | — | 1,115 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Currency translation adjustment |
(13,075 | ) | — | — | (13,075 | ) | ||||||||||
Changes related to interest rate swaps net income tax benefits of $74 |
— | — | (284 | ) | (284 | ) | ||||||||||
Changes related to benefit plans, net of income tax benefit of $553 |
— | (1,631 | ) | — | (1,631 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2011 (Successor) |
$ | (10,780 | ) | $ | (2,811 | ) | $ | (284 | ) | $ | (13,875 | ) | ||||
|
|
|
|
|
|
|
|
|
24. | SUPPLEMENTAL CASH FLOW INFORMATION |
Operating assets and liabilities
The following table summarizes the changes in the components of operating assets and liabilities (in thousands):
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
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Decrease (increase) in restricted cash |
$ | 25,827 | $ | 182,898 | $ | (36,911 | ) | $ | (15,082 | ) | ||||||||
Decrease (increase) in accounts receivable |
28,568 | (26,602 | ) | 4,567 | 318,706 | |||||||||||||
Decrease (increase) in receivable from affiliates |
(6,071 | ) | (337 | ) | — | — | ||||||||||||
Decrease (increase) in inventories |
(8,908 | ) | 36,895 | 8,497 | 34,807 | |||||||||||||
Decrease (increase) in derivatives and margin deposits |
14,287 | 12,146 | (4,495 | ) | (4,717 | ) | ||||||||||||
Decrease (increase) in other current assets |
(7,214 | ) | 67,216 | 31,850 | 645 | |||||||||||||
Decrease (increase) in other assets |
(1,874 | ) | 215 | 6,503 | 1,999 | |||||||||||||
Increase (decrease) in accounts payable and accrued liabilities |
(9,446 | ) | (11,349 | ) | 16,707 | (106,405 | ) | |||||||||||
Increase (decrease) in payable to affiliates |
6,614 | 257 | — | — | ||||||||||||||
Increase (decrease) in payables to pre-petition creditors |
(34,490 | ) | (217,471 | ) | (26,787 | ) | — | |||||||||||
Increase (decrease) in other noncurrent liabilities |
(897 | ) | 18,552 | 267 | — | |||||||||||||
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$ | 6,396 | $ | 62,420 | $ | 198 | $ | 229,953 | |||||||||||
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Non-cash transactions
We entered into the following non-cash transactions on the Emergence Date:
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Retired $123.7 million of existing SemCrude Pipeline debt and paid $1.3 million of debt issuance costs by issuing new debt with a principal balance of $125.0 million; |
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Settled certain liabilities subject to compromise by entering into a $300 million term loan credit agreement; |
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Retired $29.6 million of existing debt and paid $26.9 million of debt issuance costs by borrowing $56.5 million under a new revolving credit agreement. We also recorded an additional $12.1 million of long-term debt and other noncurrent assets related to deferred charges in the revolving credit agreement. |
Acquisitions and disposals
On November 1, 2011, we contributed certain assets and liabilities to NGL Energy in return for cash and ownership interests in NGL Energy and its general partner. The assets and liabilities we contributed are summarized in Note 6.
At the end of September 2010, we deconsolidated White Cliffs. The assets and liabilities of White Cliffs at the time of deconsolidation are summarized in Note 6.
On November 30, 2009, we reconsolidated certain of our Canadian subsidiaries. The impact of the reconsolidation is summarized in Note 8.
Other supplemental disclosures
SemGroup Corporation paid cash for interest totaling $32.6 million for the year ended December 31, 2011, $44.5 million for the year ended December 31, 2010 and $2.1 million for the month ended December 31, 2009. SemGroup, L.P. paid cash for interest of $12.3 million during the eleven months ended November 30, 2009.
We elected to defer $19.2 million of interest under a term loan during 2010, as allowed under the term loan agreement. The amount of interest that we deferred was added to the principal balance of the term loan. When we made principal payments on this term loan, we classified the payments as cash used for financing activities in the consolidated statements of cash flows, regardless of whether the principal arose from the initial term loan or from previous interest deferrals.
SemGroup Corporation paid cash for income taxes (net of refunds received) in the amount of $10.1 million during the year ended December 31, 2011, $8.1 million during the year ended December 31, 2010 and $0.1 million for the month ended December 31, 2009. SemGroup, L.P. paid cash for income taxes (net of refunds received) of $3.1 million during the eleven months ended November 30, 2009.
SemGroup Corporation accrued $4.0 million at December 31, 2011, $0.1 million at December 31, 2010 and $0.9 million at December 31, 2009, for purchases of property, plant and equipment.
We recorded non-cash reorganization expense of $20.0 million for the eleven months ended November 30, 2009 (exclusive of the non-cash reorganization items gains related to the implementation of the Plan of Reorganization described in Note 8).
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25. | QUARTERLY FINANCIAL DATA (UNAUDITED) |
Summarized information on the consolidated results of operations of SemGroup Corporation (Successor) for the quarters during the year ended December 31, 2011 is shown below (in thousands, except per share amounts):
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
Total | ||||||||||||||||
Total revenues |
$ | 406,954 | $ | 344,219 | $ | 393,404 | $ | 334,933 | $ | 1,479,510 | ||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net (Note 6) |
(64 | ) | (72 | ) | (1 | ) | 9,634 | 9,497 | ||||||||||||
Other operating costs and expenses |
394,784 | 335,854 | 387,570 | 321,184 | 1,439,392 | |||||||||||||||
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Total expenses |
394,720 | 335,782 | 387,569 | 330,818 | 1,448,889 | |||||||||||||||
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Earnings from equity method investments |
2,064 | 4,086 | 4,016 | 4,838 | 15,004 | |||||||||||||||
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Operating income |
14,298 | 12,523 | 9,851 | 8,953 | 45,625 | |||||||||||||||
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Other expenses (income), net |
14,599 | 22,624 | (5,828 | ) | 13,824 | 45,219 | ||||||||||||||
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Income (loss) from continuing operations before income taxes |
(301 | ) | (10,101 | ) | 15,679 | (4,871 | ) | 406 | ||||||||||||
Income tax expense (benefit) |
(324 | ) | 2,218 | 1,308 | (5,618 | ) | (2,416 | ) | ||||||||||||
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Income (loss) from continuing operations |
23 | (12,319 | ) | 14,371 | 747 | 2,822 | ||||||||||||||
Income (loss) from discontinued operations, net of income taxes |
9 | 20 | (32 | ) | (7 | ) | (10 | ) | ||||||||||||
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Net income (loss) |
32 | (12,299 | ) | 14,339 | 740 | 2,812 | ||||||||||||||
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Less: net income attributable to noncontrolling interests |
— | — | — | 435 | 435 | |||||||||||||||
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Net income (loss) attributable to SemGroup |
$ | 32 | $ | (12,299 | ) | $ | 14,339 | $ | 305 | $ | 2,377 | |||||||||
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Earnings (loss) per share—basic |
$ | 0.00 | $ | (0.30 | ) | $ | 0.34 | $ | 0.01 | $ | 0.06 | |||||||||
Earnings (loss) per share—diluted |
$ | 0.00 | $ | (0.30 | ) | $ | 0.34 | $ | 0.01 | $ | (0.06 | ) |
Summarized information on the consolidated results of operations of SemGroup Corporation (Successor) for the quarters during the year ended December 31, 2010 is shown below (in thousands, except per share amounts):
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
Total | ||||||||||||||||
Total revenues |
$ | 476,006 | $ | 315,899 | $ | 385,299 | $ | 453,130 | $ | 1,630,334 | ||||||||||
Loss on disposal or impairment of long-lived assets, net (Note 6) |
20 | 91,369 | 5,192 | 8,469 | 105,050 | |||||||||||||||
Other operating costs and expenses |
451,453 | 318,529 | 375,128 | 432,381 | 1,577,491 | |||||||||||||||
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Total expenses |
451,473 | 409,898 | 380,320 | 440,850 | 1,682,541 | |||||||||||||||
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Earnings from equity method investments |
— | — | — | 1,949 | 1,949 | |||||||||||||||
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Operating income (loss) |
24,533 | (93,999 | ) | 4,979 | 14,229 | (50,258 | ) | |||||||||||||
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Other expenses, net |
15,015 | 31,230 | 18,409 | 25,817 | 90,471 | |||||||||||||||
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|
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Income (loss) from continuing operations before income taxes |
9,518 | (125,229 | ) | (13,430 | ) | (11,588 | ) | (140,729 | ) | |||||||||||
Income tax expense (benefit) |
843 | (3,357 | ) | 2,242 | (5,951 | ) | (6,223 | ) | ||||||||||||
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Income (loss) from continuing operations |
8,675 | (121,872 | ) | (15,672 | ) | (5,637 | ) | (134,506 | ) | |||||||||||
Income from discontinued operations, net of income taxes |
482 | 894 | 348 | 710 | 2,434 | |||||||||||||||
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Net income (loss) |
9,157 | (120,978 | ) | (15,324 | ) | (4,927 | ) | (132,072 | ) | |||||||||||
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Less: net income attributable to noncontrolling interests |
61 | 56 | 108 | — | 225 | |||||||||||||||
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Net income (loss) attributable to SemGroup |
$ | 9,096 | $ | (121,034 | ) | $ | (15,432 | ) | $ | (4,927 | ) | $ | (132,297 | ) | ||||||
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Earnings (loss) per share—basic |
$ | 0.22 | $ | (2.92 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (3.20 | ) | ||||||
Earnings (loss) per share—diluted |
$ | 0.20 | $ | (2.92 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (3.20 | ) |
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26. | RELATED PARTY TRANSACTIONS |
NGL Energy
As described in Note 5, we own interests in NGL Energy, which we account for under the equity method.
During the year ended December 31, 2011 we purchased natural gas, condensate and propane from NGL Energy. During the year ended December 31, 2011 we sold natural gas liquids to NGL Energy. During the year ended December 31, 2011, we received payments from NGL Energy for transition services. The amounts were as follows for the year ended December 31, 2011 (in thousands):
Revenues |
$ | 9,708 | ||
Purchases |
$ | 11,270 | ||
Reimbursements from NGL Energy for transition services |
$ | 346 |
White Cliffs
As described in Note 5, we sold a portion of our ownership interests in White Cliffs at the end of September 2010. Upon closing of this sale, we deconsolidated White Cliffs and began accounting for it under the equity method. During the year ended December 31, 2011, we generated approximately $2.2 million of revenue from services we provided to White Cliffs. During the period from October 1, 2010 through December 31, 2010, we generated approximately $0.5 million of revenue from services we provided to White Cliffs.
SemGroup Holdings and SemGroup Energy Partners
During 2008, we deconsolidated SemGroup Energy Partners, and we subsequently accounted for our investment in SemGroup Energy Partners under the cost method. As described in Note 5, our ownership interest in SemGroup Energy Partners was seized by creditors prior to the Emergence Date.
Also in 2008 we deconsolidated SemGroup Holdings. At December 31, 2008, we owed $150.0 million to SemGroup Holdings, which was recorded as a liability subject to compromise. This liability was extinguished in the reorganization process.
We purchased crude oil transportation, terminalling, and storage services from SemGroup Energy Partners of $3.0 million during the eleven months ended November 30, 2009. We also purchased asphalt terminalling and storage services from SemGroup Energy Partners totaling $15.1 million during the eleven months ended November 30, 2009.
We received reimbursements from SemGroup Energy Partners for operating costs associated with services provided by us to SemGroup Energy Partners of $10.5 million during the eleven months ended November 30, 2009. We also received reimbursements from SemGroup Energy Partners for costs associated with general and administrative services provided by us to SemGroup Energy Partners of $1.6 million during the eleven months ended November 30, 2009.
On April 7, 2009, we and SemGroup Energy Partners executed definitive documentation related to the settlement of certain matters between us and SemGroup Energy Partners and entered into a settlement of a shared services agreement, which was retroactively effective as of March 31, 2009 (the "Settlement"). The Settlement provided for the following:
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SemGroup Energy Partners transferred certain crude oil assets located in Kansas and northern Oklahoma to us. SemGroup Energy Partners retained certain access and connection rights to enable it to continue to operate its crude oil trucking business in such areas. |
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We transferred to SemGroup Energy Partners: i) certain crude oil linefill and tank bottoms, (ii) certain personal property located in Oklahoma, Texas and Kansas used in connection with SemGroup Energy Partners' crude oil trucking business, and (iii) certain real property located in Oklahoma, Kansas, Texas and New Mexico. In addition, we transferred certain asphalt processing assets that were connected to, adjacent to, or otherwise contiguous with, SemGroup Energy Partners' existing asphalt facilities and associated real property interests to SemGroup Energy Partners. |
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We rejected certain service agreements and entered into new service agreements, pursuant to which SemGroup Energy Partners would provide certain crude oil and asphalt gathering, transportation, terminalling and storage services to us. |
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We rejected an existing agreement and entered into a new services agreement, pursuant to which we provide certain operational services for SemGroup Energy Partners. |
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The parties entered into a transition services agreement, pursuant to which we provide certain corporate, crude oil and asphalt transition services to SemGroup Energy Partners. |
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Certain pre-petition claims between us and SemGroup Energy Partners were netted and waived. |
As a result of this Settlement, we transferred to SemGroup Energy Partners asphalt-related assets with a net book value of $84.0 million and crude-related assets of $14.9 million. Also as part of this Settlement, SemGroup Energy Partners transferred to us crude-related assets of $4.3 million. SemGroup Energy Partners made an unsecured claim of $55 million associated with the rejection of these contracts.
SemCAMS and SemCanada Crude
As described in Note 5, SemCAMS and SemCanada Crude were not consolidated while we were in bankruptcy. We sold product to SemCAMS and SemCanada Crude totaling $155.5 million during the eleven months ended November 30, 2009. We purchased $136.6 million of product from SemCAMS and SemCanada Crude during the eleven months ended November 30, 2009.
Vulcan
In 2009, we assigned our 50% interest in Vulcan-Koch Asphalt Marketing, LLC ("Vulcan") for proceeds of $3.9 million. The buyer of Vulcan was an entity controlled by an individual who had the right to nominate members of SemGroup, L.P.'s Management Committee.
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USE OF ESTIMATES—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Our significant estimates include, but are not limited to: (1) allowances for doubtful accounts receivable; (2) estimated useful lives of assets, which impact depreciation; (3) estimated fair values of long-lived assets recorded in fresh-start reporting; (4) estimated fair values of long-lived assets used in impairment tests; (5) fair values of derivative instruments; and (6) accrual and disclosure of contingent losses. Although management believes these estimates are reasonable, actual results could differ materially from these estimates.
FRESH-START REPORTING—We adopted fresh-start reporting on the Emergence Date. In connection with fresh-start reporting, we recorded the following at the Emergence Date:
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assets, at their estimated fair values; |
|
goodwill, to the extent our reorganization value (described in Note 8) exceeded the amounts attributed to specific tangible or identified intangible assets; |
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liabilities, at their fair values; and |
|
deferred tax liabilities, based on the adjusted balances of the assets to which they relate. |
CASH AND CASH EQUIVALENTS—Cash includes currency on hand and demand and time deposits with banks or other financial institutions. Cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase. Balances at financial institutions may exceed federally insured limits.
RESTRICTED CASH—As described in Note 8, our Plan of Reorganization specified the total amount of consideration we would provide to all pre-petition creditors in settlement of their claims. At December 31, 2011, we had not yet completed the process of disbursing funds to settle pre-petition claims, as we had not yet completed the process of resolving all of the claims. The restricted cash balance at December 31, 2011 includes $37.5 million of cash that is restricted for this purpose. The December 31, 2011 restricted cash balance also includes $2.0 million of cash that is restricted for other purposes.
ACCOUNTS RECEIVABLE—Accounts receivable are reported net of the allowance for doubtful accounts. Our assessment of the allowance for doubtful accounts is based on several factors, including the overall creditworthiness of our customers, existing economic conditions, and the amount and age of past due accounts. We enter into netting arrangements with certain counterparties to help mitigate credit risk. Receivables subject to netting are presented as gross receivables (with the related accounts payable also presented gross) until such time as the balances are settled. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are written off against the allowance for doubtful accounts only after all collection attempts have been exhausted.
At the Emergence Date, as part of fresh-start reporting, we recorded accounts receivable at fair value. This was accomplished by reducing the allowance for doubtful accounts to $-0- and recording a corresponding reduction to accounts receivable. We report any amounts we have collected in excess of the estimated Emergence Date fair value as reductions to operating expenses in the consolidated statements of operations.
INVENTORIES—Inventories primarily consist of natural gas and natural gas liquids, crude oil, and asphalt. Inventories are valued at the lower of cost or market, with cost generally determined using the weighted-average method. The cost of inventory includes applicable transportation costs.
We enter into exchanges with third parties whereby we acquire products that differ in location, grade, or delivery date from products we have available for sale. These exchanges are valued at cost, and although a transportation, location or product differential may be recorded, generally no gain or loss is recognized.
PROPERTY, PLANT AND EQUIPMENT—Property, plant and equipment is recorded at cost (although, as described above, property, plant and equipment was adjusted to fair value at November 30, 2009 upon adoption of fresh-start reporting). We capitalize costs that extend or increase the future economic benefits of property, plant and equipment, and expense maintenance costs that do not. When assets are disposed of, their cost and related accumulated depreciation are removed from the balance sheet, and any resulting gain or loss is recorded as a gain or loss on disposal or impairment of long-lived assets in the consolidated statements of operations.
Depreciation is calculated primarily on the straight-line method over the following estimated useful lives:
Pipelines and related facilities |
10 – 31 years | |||
Storage and terminal facilities |
10 – 25 years | |||
Natural gas gathering and processing facilities |
10 – 31 years | |||
Office and other property and equipment |
3 – 31 years |
LINEFILL—Pipelines and storage facilities generally require a minimum volume of product in the system to enable the system to operate. Such product, known as linefill, is generally not available to be withdrawn from the system. Linefill owned by us in facilities operated by us is recorded at historical cost, is included in property, plant and equipment in the consolidated balance sheets, and is not depreciated. We also own linefill in third party facilities, which is included in inventory or in other noncurrent assets on the consolidated balance sheets.
IMPAIRMENT OF LONG-LIVED ASSETS—We test long-lived asset groups for impairment when events or circumstances indicate that the net book value of the asset group may not be recoverable. We test an asset group for impairment by estimating the undiscounted cash flows expected to result from its use and eventual disposition. If the estimated undiscounted cash flows are lower than the net book value of the asset group, we then estimate the fair value of the asset group and record a reduction to the net book value of the assets and a corresponding impairment loss.
GOODWILL—We test goodwill for impairment on an annual basis, or more often if circumstances warrant, by estimating the fair value of the asset group to which the goodwill relates and comparing this fair value to the net book value of the asset group. If fair value is less than net book value, we estimate the implied fair value of goodwill, reduce the book value of the goodwill to the implied fair value, and record a corresponding impairment loss. Prior to the Emergence Date, SemGroup L.P.'s policy was to test goodwill for impairment on December 31 of each year. Subsequent to the Emergence Date, SemGroup Corporation's policy is to test goodwill for impairment on October 1 of each year. See Note 6 for discussion of goodwill impairment.
During September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08, "Testing Goodwill for Impairment". This ASU is designed to simplify how entities test goodwill for impairment. Under the new standard, an entity may first assess qualitative factors to determine whether it is more likely than not that the fair value of an asset group is less than the carrying amount, for the purpose of determining whether it is necessary to estimate the fair value of the asset group to which the goodwill relates. We plan to adopt this new standard in 2012.
EQUITY METHOD INVESTMENTS—We account for an investment under the equity method when we have significant influence over, but not control of, the significant operating decisions of the investee. Under the equity method, we record in the consolidated statements of operations our share of the earnings or losses of the investee, with a corresponding adjustment to the investment balance on our consolidated balance sheet. When we receive a distribution from an equity method investee, we record a corresponding reduction to the investment balance.
For equity method investments for which we do not expect earnings information to be consistently available to record earnings in the quarter in which they are generated, our policy is to record equity earnings on a one-quarter lag. This does not have a material impact on our financial statements.
DEBT ISSUANCE COSTS—Costs incurred in connection with the issuance of long-term debt are reported as other noncurrent assets and are amortized to interest expense using the straight-line method over the term of the related debt. Use of the straight-line method of amortization does not differ materially from the "effective interest" method.
COMMODITY DERIVATIVE INSTRUMENTS—We generally record the fair value of commodity derivative instruments on the consolidated balance sheets and the change in fair value as an increase or decrease to product revenue.
As shown in Note 15, the fair value of commodity derivatives at December 31, 2011 and 2010 are recorded to other current assets or other current liabilities on the consolidated balance sheets. Related margin deposits are recorded to other current assets or other current liabilities on the consolidated balance sheets. Margin deposits are not generally netted against derivative assets or liabilities.
The fair value of a derivative contract is determined based on the nature of the transaction and the market in which the transaction was executed. Quoted market prices, when available, are used to value derivative transactions. In situations where quoted market prices are not readily available, we estimate the fair value using other valuation techniques that reflect the best information available under the circumstances. Fair value measurements of derivative assets include consideration of counterparty credit risk. Fair value measurements of derivative liabilities include consideration of our creditworthiness.
We have elected "normal purchase" and "normal sale" treatment for certain commitments to purchase or sell petroleum products at future dates. This election is only available when a transaction that would ordinarily meet the definition of a derivative but instead is expected to result in physical delivery of product over a reasonable period in the normal course of business and is not expected to be net settled. Agreements accounted for under this election are not recorded at fair value; instead, the transaction is recorded when the product is delivered.
PAYABLES TO PRE-PETITION CREDITORS—As described in Note 8, our Plan of Reorganization specified the total amount of consideration we would provide to all pre-petition creditors in settlement of their claims. At December 31, 2011, we had not yet completed the process of disbursing funds to settle pre-petition claims, as we had not yet completed the process of resolving all of the claims. We recorded a liability of $38.7 million at December 31, 2011 associated with these obligations, $0.9 million of which is associated with discontinued operations and is reported within other current liabilities. Of this amount, $37.5 million is held in cash accounts which are restricted for this purpose. The remaining amount is associated with certain accounts receivable and other current assets. Any proceeds received from these assets will be remitted to pre-petition creditors.
CONTINGENT LOSSES—We record a liability for a contingent loss when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We record attorneys' fees incurred in connection with a contingent loss at the time the fees are incurred. We do not record liabilities for attorneys' fees that are expected to be incurred in the future.
ASSET RETIREMENT OBLIGATIONS—Asset retirement obligations include legal or contractual obligations associated with the retirement of long-lived assets, such as requirements to incur costs to dispose of equipment or to remediate the environmental impacts of the normal operation of the assets. We record liabilities for asset retirement obligations when a known obligation exists under current law or contract and when a reasonable estimate of the value of the liability can be made.
DISCONTINUED OPERATIONS—SemMaterials, SemFuel, and SemEuro Supply are presented as discontinued operations in the consolidated financial statements. We classify a component of our business as a discontinued operation when we commit to a plan to sell the component and believe it is probable that a sale will be completed within one year. A component that is disposed of in a manner other than by sale is classified as discontinued when the component is actually disposed. Investments accounted for under the equity method, or the cost method, do not qualify for treatment as discontinued operations. A component that is disposed of may not qualify for treatment as a discontinued operation if we have significant continuing involvement in the operations of the component after the disposal.
Once a component meets the requirements to be classified as a discontinued operation, previous financial statements are retrospectively adjusted to reflect the component as a discontinued operation for all periods presented. Income and losses of discontinued operations (excluding corporate general and administrative expense allocations) are combined into one line on the consolidated statements of operations. The cash flows from discontinued operations are not separately identified in the consolidated statements of cash flows.
REVENUE RECOGNITION—Sales of product, as well as gathering and marketing revenues, are recognized at the time title to the product transfers to the purchaser, which typically occurs upon receipt of the product by the purchaser. Terminal and storage revenues are recognized at the time the service is performed. Revenue for the transportation of product is recognized upon delivery of the product to its destination. Certain revenue transactions are reported on a net basis, including derivative instruments considered held for trading purposes and certain buy/sell transactions (see "Purchases and Sales of Inventory with the Same Counterparty"). Taxes collected from customers and remitted to governmental authorities are recorded on a net basis (excluded from revenue).
COSTS OF PRODUCTS SOLD—Costs of products sold consists of the cost to purchase the product, the cost to transport the product to the point of sale, and the cost to store the product until it is sold.
PURCHASES AND SALES OF INVENTORY WITH THE SAME COUNTERPARTY—We routinely enter into transactions to purchase inventory from, and sell inventory to, the same counterparty. Such transactions that are entered into in contemplation of one another are recorded on a net basis.
INTEREST EXPENSE DURING REORGANIZATION—While we were in bankruptcy, we only recorded interest expense to the extent such interest was expected to be paid. Interest obligations that were expected to be compromised in the reorganization process (i.e., not paid in full) were not recorded as expenses. The total amount of interest that we would have been contractually obligated to pay, but which was compromised in the reorganization process and not recorded as an expense, was $221.0 million for the eleven months ended November 30, 2009.
CURRENCY TRANSLATION—The consolidated financial statements are presented in U.S. dollars. Our segments operate in four countries, and each segment has identified a "functional currency," which is the primary currency in the environment in which the segment operates. The functional currencies include the U.S. dollar, the Canadian dollar, the British pound sterling, and the Mexican peso.
At the end of each reporting period, the assets and liabilities of each segment are translated from its functional currency to U.S. dollars using the exchange rate at the end of the month. The monthly results of operations of each segment are generally translated from its functional currency to U.S. dollars using the average exchange rate during the month. Changes in exchange rates result in currency translation gains and losses, which are recorded within other comprehensive income (loss).
Certain segments also enter into transactions in currencies other than their functional currencies. At the end of each reporting period, each segment re-measures the related receivables, payables, and cash to its functional currency using the exchange rate at the end of the period. Changes in exchange rates between the time the transactions were entered into and the end of the reporting period result in currency transaction gains or losses, which are recorded in the consolidated statements of operations.
INCOME TAXES—Deferred income taxes are accounted for under the liability method, which takes into account the differences between the basis of the assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. We record valuation allowances on deferred tax assets when, in the opinion of management, it is more likely than not that the asset will not be recovered.
We monitor uncertain tax positions and we recognize tax benefits only when management believes the relevant tax positions would more likely than not be sustained upon examination. We record any interest and any penalties related to income taxes within income tax expense in the consolidated statements of operations.
REORGANIZATION ITEMS—As described in Note 1, we operated as a debtor-in-possession subject to the jurisdiction of the bankruptcy court during the eleven months ended November 30, 2009. Revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business during that period are reported as reorganization items in the consolidated statement of operations. The effects of the adjustments to the reported amounts of assets and liabilities resulting from the adoption of fresh-start reporting and the effects of the forgiveness of debt in the reorganization are reported within reorganization items in the consolidated statement of operations for the eleven months ended November 30, 2009.
RECLASSIFICATIONS—Certain reclassifications have been made to conform prior year balances to the current year presentation.
EQUITY-BASED COMPENSATION—We grant certain of our employees equity-based compensation awards which vest contingent on continued service of the recipient or on their achievement of specific performance targets. We record compensation expense for these outstanding awards over applicable service or performance periods based on their grant date fair value with a corresponding increase to additional paid-in capital.
COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)—Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Our comprehensive income (loss) consists of currency translation adjustments, changes in the funded status of pension benefit plans and changes in the fair value of interest rate swaps.
During June 2011, the FASB issued ASU No. 2011-05, "Presentation of Comprehensive Income". This ASU is designed to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This standard is complied with in these consolidated financial statements.
In December 2011, the FASB issued ASU 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which deferred certain presentation requirements in ASU 2011-05 for items reclassified out of accumulated other comprehensive income. We plan to adopt this standard in 2012.
|
Pipelines and related facilities |
10 – 31 years | |||
Storage and terminal facilities |
10 – 25 years | |||
Natural gas gathering and processing facilities |
10 – 31 years | |||
Office and other property and equipment |
3 – 31 years |
|
Cash |
$ | 9,709 | ||
Other current assets |
156,873 | |||
Property, plant and equipment |
276,246 | |||
Other noncurrent assets |
2,666 | |||
|
|
|||
Total assets |
$ | 445,494 | ||
|
|
|||
Current liabilities |
$ | 140,553 | ||
Long-term debt |
87 | |||
Partners' capital attributable to SemGroup |
177,323 | |||
Partners' capital attributable to noncontrolling interests |
127,531 | |||
|
|
|||
Total liabilities and partners' capital |
$ | 445,494 | ||
|
|
|
December 31, 2011 |
(unaudited) December 31, 2010 |
|||||||
Current assets |
$ | 11,653 | $ | 9,797 | ||||
Property, plant and equipment, net |
222,473 | 234,300 | ||||||
Goodwill |
17,000 | 17,000 | ||||||
Other intangible assets, net |
33,073 | 40,848 | ||||||
|
|
|
|
|||||
Total assets |
$ | 284,199 | $ | 301,945 | ||||
|
|
|
|
|||||
Current liabilities |
$ | 3,259 | $ | 3,824 | ||||
Members' equity |
280,940 | 298,121 | ||||||
|
|
|
|
|||||
Total liabilities and members' equity |
$ | 284,199 | $ | 301,945 | ||||
|
|
|
|
Year Ended December 31, 2011 |
(unaudited) Three Months Ended December 31, 2010 |
|||||||
Revenue |
$ | 66,097 | $ | 13,619 | ||||
Operating, general and administrative expenses |
12,746 | 3,294 | ||||||
Depreciation and amortization expense |
20,842 | 5,680 | ||||||
Net income |
32,509 | 4,645 |
(unaudited) December 31, 2011 |
||||
Current assets |
$ | 332,144 | ||
Property plant and equipment, net |
227,893 | |||
Goodwill |
92,930 | |||
Intangible and other assets, net |
102,238 | |||
|
|
|||
Total assets |
$ | 755,205 | ||
|
|
|||
Current liabilities |
$ | 269,073 | ||
Long-term debt |
117,590 | |||
Other noncurrent liabilities |
222 | |||
Partners' equity |
368,320 | |||
|
|
|||
Total liabilities and partners' equity |
$ | 755,205 | ||
|
|
(unaudited) Nine Months Ended December 31, 2011 |
||||
Revenue |
$ | 871,544 | ||
Operating, general and administrative expenses |
869,143 | |||
Depreciation and amortization expense |
8,480 | |||
Net loss |
(6,079 | ) |
|
Event |
Segment | Pre-Tax Gain (Loss) |
||||
Contribution of SemStream assets to NGL Energy (a) |
SemStream | $ | 44,266 | |||
SemStream residential division impairment (b) |
SemStream | (8,684 | ) | |||
SemLogistics goodwill impairment (c) |
SemLogistics | (44,663 | ) |
(a) | On November 1, 2011, we contributed certain assets and liabilities of our SemStream segment to NGL Energy. On that date these assets and liabilities had the net book values (in thousands) below. However, these values were subject to post closing adjustments, which have since been completed, and resulted in a $2.1 million working capital adjustment. |
Inventory |
$ | 107,858 | ||
Other current assets |
11,263 | |||
Property plant and equipment |
47,756 | |||
Goodwill |
50,071 | |||
Other intangible assets |
12,408 | |||
Other noncurrent assets |
2,818 | |||
Other current liabilities |
(2,947 | ) | ||
Other noncurrent liabilities |
(172 | ) | ||
|
|
|||
Net assets contributed |
$ | 229,055 | ||
|
|
In return for this contribution, we received $93.0 million of cash and ownership interests in NGL Energy and its general partner with an estimated fair value of $184.0 million. We recorded a gain of $44.3 million on this transaction, which includes the impact of a $2.1 million working capital adjustment and the write-off of $1.6 million of software. Additionally, $2.2 million of capitalized loan fees were written-off as a result of long-term debt payments made from the proceeds of this transaction.
(b) | We test all of our goodwill for impairment as of October 1 of each year. Upon completing this impairment test for 2011, we concluded that the goodwill and other intangible assets attributable to the Arizona residential business of our SemStream segment (which was not contributed to NGL Energy) were impaired. To calculate the impairment loss, we estimated the fair value of this reporting unit using the present value of estimated future cash flows, discounted at a rate of 9.4%, and recorded a full impairment of the $3.6 million balance of goodwill and the $5.0 million balance of other intangible assets associated with customer relationships. No impairment was recorded related to the regulated assets of the Arizona residential business in accordance with FASB ASC Topic 980 – Regulated Operations. |
(c) | High crude oil prices and backwardated market conditions in 2011 had a negative effect on SemLogistic's storage economics. As a result, the demand for storage is depressed and SemLogistics has had difficulty securing contract renewals. SemLogistics successfully passed the initial 2011 goodwill impairment test. However, a review of the sensitivity of the test results indicated that a ten percent reduction in the estimated revenue in 2012 and 2013 would result in a test failure. In addition, we received notice in late January 2012 from two customers that their intentions were not to renew their storage contracts upon expiration. These notifications, coupled with the sensitivity of the test results to loss of revenue, led us to conclude that impairment of the goodwill of SemLogistics was required. Accordingly, we impaired the full amount of goodwill which was $44.7 million at October 1, 2011. |
Year Ended December 31, 2010 (Successor)
Losses recorded during the year ended December 31, 2010 related to the disposal or impairment of long-lived assets included the following (in thousands):
Event |
Segment | Loss | ||||
SemCanada Crude impairment (a) |
Corporate and other | $ | (91,756 | ) | ||
Deconsolidation of White Cliffs (b) |
SemCrude | (6,828 | ) | |||
SemMexico goodwill impairment (c) |
SemMexico | (8,863 | ) |
(a) |
During the year ended December 31, 2010, we revised downward our projections of the future earnings potential of the SemCanada Crude segment, following a significant loss of customers, coupled with a significant decline in profitability and an assessment by a national consultancy firm that certain market conditions that are adversely impacting this segment were likely to continue. In response to these events, we tested SemCanada Crude's goodwill and other intangible assets for impairment as of May 31, 2010.
During December 2010, we completed the sale of the property, plant and equipment of the SemCanada Crude segment. The proceeds from the sale were not significantly different than the net book value of the assets sold. Certain marketing operations in the Northern United States that were previously conducted with the participation of the SemCanada Crude segment are now being conducted in their entirety by the SemCrude segment, and the remaining operations of the SemCanada Crude segment were wound down. |
(b) | As described in Note 5, we sold a portion of our ownership interests in White Cliffs during September 2010. We received $140.8 million of proceeds from these transactions, which were used to make principal payments on long-term debt. These proceeds may be adjusted upward upon final resolution of certain post-closing adjustments. |
Accounts receivable |
$ | 4,625 | ||
Other current assets |
143 | |||
Property, plant and equipment, net |
237,506 | |||
Goodwill |
17,000 | |||
Other intangible assets |
43,267 | |||
Accounts payable and accrued liabilities |
(3,736 | ) | ||
Payables to affiliates |
(659 | ) | ||
|
|
|||
Net assets |
$ | 298,146 | ||
|
|
(c) | We test goodwill for impairment as of October 1 of each year. Upon completing this impairment test for 2010, we concluded that the goodwill attributable to our SemMexico segment was impaired, due primarily to a decline in demand for asphalt resulting from a slowdown in road construction. To calculate the impairment loss, we estimated the fair value of the SemMexico segment using the present value of estimated future cash flows, discounted at a rate of 13.84%. |
Event |
Segment | Gain (Loss) |
||||
Impairment of natural gas gathering and processing assets (a) |
SemGas | $ | (13,625 | ) | ||
Loss of SemGroup Energy Partners (b) |
Corporate and other | 613,918 | * | |||
Settlement with SemGroup Energy Partners (c) |
SemCrude | (11,677 | )* |
* | Reported within reorganization items in the consolidated statement of operations |
(a) | We had certain natural gas gathering and processing assets that were idle or had a low volume of activity. We analyzed these assets and concluded that they were not likely to become significantly utilized unless market conditions improved, and accordingly we recorded an impairment to reduce these assets to estimated net realizable value. This impairment reduced property, plant and equipment by $7.6 million and reduced other intangible assets by $6.0 million. |
(b) | As described in Note 5, our ownership interests in SemGroup Energy Partners were seized by creditors. Our investment balance in SemGroup Energy Partners was in a liability position, due in part to deferred gains on previous sales of limited partner interests. |
(c) | We reached an agreement with SemGroup Energy Partners to settle a variety of outstanding matters. As part of this settlement, we surrendered property, plant and equipment with a net book value of $11.7 million. |
Inventory |
$ | 107,858 | ||
Other current assets |
11,263 | |||
Property plant and equipment |
47,756 | |||
Goodwill |
50,071 | |||
Other intangible assets |
12,408 | |||
Other noncurrent assets |
2,818 | |||
Other current liabilities |
(2,947 | ) | ||
Other noncurrent liabilities |
(172 | ) | ||
|
|
|||
Net assets contributed |
$ | 229,055 | ||
|
|
Accounts receivable |
$ | 4,625 | ||
Other current assets |
143 | |||
Property, plant and equipment, net |
237,506 | |||
Goodwill |
17,000 | |||
Other intangible assets |
43,267 | |||
Accounts payable and accrued liabilities |
(3,736 | ) | ||
Payables to affiliates |
(659 | ) | ||
|
|
|||
Net assets |
$ | 298,146 | ||
|
|
|
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||
External revenue |
$ | — | $ | — | $ | 2,335 | $ | 114,591 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gain on disposal of long-lived assets, net |
$ | — | $ | — | $ | — | $ | 16,846 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations before income taxes |
$ | (8 | ) | $ | 2,668 | $ | 215 | $ | (141,586 | ) | ||||||||
Income tax expense |
2 | 234 | — | 27 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations, net of income taxes |
$ | (10 | ) | $ | 2,434 | $ | 215 | $ | (141,613 | ) | ||||||||
|
|
|
|
|
|
|
|
Event |
Proceeds | Net Book Value |
Gain (Loss) |
|||||||||
Sale of SemFuel terminals (a) |
$ | 64,332 | $ | 53,119 | $ | 11,213 | ||||||
Sale of SemFuel retail assets (b) |
1,665 | 538 | 1,127 | |||||||||
Sale of SemFuel storage tank (c) |
2,900 | 6,030 | (3,130 | ) | ||||||||
Sale of SemMaterials intellectual property (d) |
6,500 | — | 6,500 | |||||||||
Sale of investment in Vulcan (e) |
3,900 | 8,043 | (4,143 | ) | ||||||||
Sale of SemMaterials residual fuel division (f) |
2,500 | — | 2,500 | |||||||||
Sale of various SemMaterials assets (g) |
6,077 | 3,298 | 2,779 |
(a) | We sold substantially all of the SemFuel refined product terminal assets in September 2009. |
(b) | We sold the assets of SemFuel's retail petroleum business in November 2009. |
(c) | Represents the sale of a product storage tank owned by SemFuel. |
(d) | Represents the sale of SemMaterials intellectual property and laboratory equipment. |
(e) | SemMaterials sold its 50% interest in an asphalt marketing business. |
(f) | Represents the sale of the SemMaterials residual fuel division. |
(g) | Represents the sale or disposal of the remaining assets of SemMaterials through a series of transactions. |
|
SemGroup, L.P. (Predecessor) |
Reconsolidation of SemCAMS and SemCanada Crude(a) |
Reorganization Adjustments |
Fresh Start Adjustments |
SemGroup Corporation (Successor) |
||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 793,126 | $ | 132,813 | $ | (858,241 | ) | (b | ) | $ | — | $ | 67,698 | |||||||||||||||
Restricted cash |
15,082 | 15,692 | 182,818 | (c | ) | — | 213,592 | |||||||||||||||||||||
Accounts receivable |
79,392 | 139,712 | (230 | ) | — | 218,874 | ||||||||||||||||||||||
Receivable from affiliates |
86,560 | (84,842 | ) | (1,718 | ) | (d | ) | — | — | |||||||||||||||||||
Inventories |
121,958 | 12,569 | — | 36,521 | (p | ) | 171,048 | |||||||||||||||||||||
Current assets of discontinued operations |
10,593 | — | — | — | 10,593 | |||||||||||||||||||||||
Other current assets |
49,487 | 93,732 | — | 1,785 | (p | ) | 145,004 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total current assets |
1,156,198 | 309,676 | (677,371 | ) | 38,306 | 826,809 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Property, plant and equipment |
707,628 | 202,879 | — | 150,588 | (p | ) | 1,061,095 | |||||||||||||||||||||
Goodwill |
46,729 | 52,787 | — | 89,296 | (p | ) | 188,812 | |||||||||||||||||||||
Other intangible assets |
14,081 | 42,100 | — | 78,271 | (p | ) | 134,452 | |||||||||||||||||||||
Investments in non-consolidated subsidiaries |
102,598 | (29,098 | ) | (73,500 | ) | (e | ) | — | — | |||||||||||||||||||
Note receivable from affiliate |
139,109 | (139,109 | ) | — | — | — | ||||||||||||||||||||||
Other assets, net |
8,574 | 767 | 46,057 | (f | ) | 5,946 | (p | ) | 61,344 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total assets |
$ | 2,174,917 | $ | 440,002 | $ | (704,814 | ) | $ | 362,407 | $ | 2,272,512 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
LIABILITIES AND OWNERS' EQUITY (DEFICIT) |
||||||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||
Accounts payable |
$ | 101,295 | $ | 93,374 | $ | (21,102 | ) | (g | ) | $ | — | $ | 173,567 | |||||||||||||||
Accrued liabilities |
93,188 | 17,143 | (77,938 | ) | (h | ) | (267 | ) | 32,126 | |||||||||||||||||||
Payables to pre-petition creditors |
— | 8,221 | 302,212 | (h | ) | — | 310,433 | |||||||||||||||||||||
Other current liabilities |
25,239 | 454 | — | 4,909 | (p | ) | 30,602 | |||||||||||||||||||||
Current liabilities of discontinued operations |
3,663 | — | 10,559 | (i | ) | — | 14,222 | |||||||||||||||||||||
Current portion of long-term debt |
197,727 | — | (176,734 | ) | (j | ) | — | 20,993 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total current liabilities |
421,112 | 119,192 | 36,997 | 4,642 | 581,943 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Liabilities subject to compromise |
4,707,994 | — | (4,707,994 | ) | (m | ) | — | — | ||||||||||||||||||||
Long-term debt |
90 | — | 514,001 | (j | ) | 267 | 514,358 | |||||||||||||||||||||
Deferred income taxes |
36,802 | 64,096 | — | 4,845 | (q | ) | 105,743 | |||||||||||||||||||||
Other noncurrent liabilities |
2,276 | 32,856 | 16,037 | (k | ) | — | 51,169 | |||||||||||||||||||||
Investment in SemGroup Holdings |
613,918 | — | (613,918 | ) | (l | ) | — | — | ||||||||||||||||||||
Predecessor Equity |
||||||||||||||||||||||||||||
SemGroup, L.P. partners' capital (deficit): |
||||||||||||||||||||||||||||
Partners' capital (deficit) |
(3,597,238 | ) | 223,858 | 3,373,380 | (n | ) | — | — | ||||||||||||||||||||
Accumulated other comprehensive income (loss) |
(11,962 | ) | — | — | 11,962 | (r | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total SemGroup, L.P. partners' capital (deficit) |
(3,609,200 | ) | 223,858 | 3,373,380 | 11,962 | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Successor Equity |
||||||||||||||||||||||||||||
SemGroup Corporation: |
||||||||||||||||||||||||||||
Common stock |
— | — | 414 | (o | ) | — | 414 | |||||||||||||||||||||
Additional paid in capital |
— | — | 676,269 | (o | ) | 340,995 | (r | ) | 1,017,264 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total SemGroup Corporation equity |
— | — | 676,683 | 340,995 | 1,017,678 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Noncontrolling interests in consolidated subsidiaries |
1,925 | — | — | (304 | ) | (r | ) | 1,621 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total owners' equity (deficit) |
(3,607,275 | ) | 223,858 | 4,050,063 | 352,653 | 1,019,299 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total liabilities and owners' equity (deficit) |
$ | 2,174,917 | $ | 440,002 | $ | (704,814 | ) | $ | 362,407 | $ | 2,272,512 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | As described in Note 5, we regained control of SemCAMS and SemCanada Crude on the Emergence Date. This column reflects the reconsolidation of these entities at November 30, 2009, with their assets and liabilities reported at fair value at that date. |
(b) | Represents disbursements made pursuant to the Plan of Reorganization for distributions to creditors, cash transferred to a restricted account for future distributions to creditors, cure payments resulting from assumption of certain contracts, and the funding of a trust for the benefit of pre-petition creditors. The adjustment to cash also includes the issuance of new debt and the repayment of existing debt. |
(c) | Represents cash set aside for payments to pre-petition creditors in settlement of liabilities subject to compromise. |
(d) | Certain amounts receivable from SemCanada Energy were determined to be uncollectable and were written off. |
(e) | Represents the write-off of our investment in SemCanada Energy. |
(f) | Represents debt issuance costs and deferred charges related to new financing agreements. |
(g) | In the reorganization process, we elected not to cancel certain contracts that were in effect prior to the Petition Date. For the contracts we assumed, we were required to make payments to the other parties on the contracts to cure defaults on the contracts. |
(h) | Payables to pre-petition creditors include accruals for payments to be made to pre-petition creditors in settlement of liabilities subject to compromise. In addition, $77.0 million of liabilities for professional fees and $0.9 million of interest payable were transferred into this account. |
(i) | Pursuant to the Plan of Reorganization, we were obligated to remit funds to pre-petition creditors once SemMaterials and SemFuel sold certain specified inventory and collected certain specified accounts receivable. |
(j) | The net change in long-term debt results from the repayment of debtor-in-possession financing, the refinancing of SemCrude Pipeline and SemLogistics credit facilities, and the issuance of new debt, as summarized below (in thousands):
|
(k) | As described in Note 19, we issued warrants to settle certain liabilities subject to compromise. |
(l) | As described in Note 5, we surrendered all of our ownership interests in SemGroup Energy Partners in the reorganization process. |
(m) | Upon filing for bankruptcy protection, certain claims against us were stayed, pending resolution of the amount of consideration the claimants would receive in the reorganization process. We recorded as liabilities subject to compromise our estimate of the total amount of valid claims that were expected not to be paid in full. Liabilities subject to compromise were settled or extinguished in the reorganization process. |
(n) | Reflects the gain on extinguishment of debt and the cancellation of partnership interests in SemGroup, L.P. pursuant to the Plan of Reorganization. |
(o) | SemGroup Corporation issued shares of new common stock in settlement of liabilities subject to compromise. |
(p) | Reflects adjustments to the recorded values of assets and liabilities resulting from fresh-start reporting. |
(q) | Reflects the impact of fresh-start reporting on deferred taxes. |
(r) | Reflects the elimination of SemGroup, L.P.'s accumulated other comprehensive income and the gain on revaluation of assets and liabilities resulting from fresh-start reporting. |
Issuance of SemGroup term loan |
$ | 300,000 | ||
Borrowings on SemGroup revolving credit facility |
68,321 | |||
Refinancing of SemCrude Pipeline credit facility |
1,300 | |||
Refinancing of SemLogistics credit facility |
(3,214 | ) | ||
Repayment of debtor-in-possession financing |
(29,140 | ) | ||
|
|
|||
$ | 337,267 | |||
|
|
Reorganization value |
$ | 1,500,000 | ||
less: SemGroup term loan |
(300,000 | ) | ||
less: SemCrude Pipeline credit facility |
(125,000 | ) | ||
less: SemLogistics credit facility |
(41,285 | ) | ||
less: warrants (Note 19) |
(16,037 | ) | ||
|
|
|||
SemGroup Corporation equity |
$ | 1,017,678 | ||
|
|
Gain on extinguishment of debt (a) |
$ | 2,544,218 | ||
Gain on disposal of SemGroup Energy Partners (b) |
613,918 | |||
Gain on asset revaluation in fresh-start reporting (c) |
352,653 | |||
Gain from Canadian plan effects and reconsolidation (d) |
244,281 | |||
Professional fees (e) |
(164,964 | ) | ||
Uncollectable accounts expense (f) |
(38,757 | ) | ||
Loss on settlement with SemGroup Energy Partners (g) |
(11,677 | ) | ||
Employment costs (h) |
(6,706 | ) | ||
Other |
(523 | ) | ||
|
|
|||
Reorganization items gain |
$ | 3,532,443 | ||
|
|
(a) | Represents the gain on the forgiveness of debt pursuant to the Plan of Reorganization. Also includes refinements to the estimated amount of valid claims by pre-petition creditors. During 2008, we recorded an estimate for the total amount of claims subject to compromise. During 2009, we refined this estimate as we reviewed the claims, and reversed some of the amounts that had been accrued in 2008. |
(b) | As described in Note 5, we surrendered all of our ownership interests in SemGroup Energy Partners in the reorganization process. At the time SemGroup Energy Partners was deconsolidated, our investment balance was in a liability position, due in part to deferred gains on previous sales of limited partner interests. |
(c) | As described earlier in this Note, we revalued our assets and liabilities in fresh-start reporting, and recorded a reorganization gain for the increase in fair value of net assets over the previously recorded value. |
(d) | As described earlier in this Note, we reconsolidated SemCAMS and SemCanada Crude on the Emergence Date. The reorganization gain includes the excess of the fair value of SemCAMS and SemCanada Crude upon reconsolidation over the recorded value of our investment in SemCAMS and SemCanada Crude. In addition, the reorganization gain includes the restoration of certain receivables from SemCAMS and SemCanada Crude pursuant to their plans of reorganization.
|
(e) | Professional fees include a variety of services related to the restructuring of the business, including, among others:
|
(f) | Represents the write-off of receivables in situations where we believe the customer non-payment was related to our bankruptcy. This amount includes recovery of certain receivables from SemGroup Energy Partners. |
(g) | We reached an agreement with SemGroup Energy Partners to settle a variety of outstanding matters. As part of this settlement, we surrendered property, plant and equipment with a net book value of $11.7 million. |
(h) | Employment costs include severance related to the termination of employment relationships and bonuses paid to retain personnel during the reorganization process. |
|
Revenue |
$ | 677,046 | ||
Costs of products sold, exclusive of depreciation and amortization |
598,882 | |||
Operating expenses |
64,775 | |||
General and administrative expense |
30,193 | |||
|
|
|||
Operating loss |
(16,804 | ) | ||
Interest expense |
11,189 | |||
Other income, net |
(4,899 | ) | ||
Equity in earnings of subsidiaries other than U.S. Debtors (*) |
(140,516 | ) | ||
Reorganization items gain |
(3,417,712 | ) | ||
|
|
|||
Income from continuing operations |
3,535,134 | |||
Loss from discontinued operations |
(140,550 | ) | ||
|
|
|||
Net income |
$ | 3,394,584 | ||
|
|
(*) | Represents the equity in the earnings of entities that are included in our consolidated statements of operations, but which are not U.S. Debtors. These are accounted for under the equity method in this condensed combined statement of operations of the U.S. Debtors. |
Net cash provided by (used in): |
||||
Operating activities |
$ | (610,832 | ) | |
Investing activities |
28,284 | |||
Financing activities |
14,655 | |||
|
|
|||
Net decrease in cash and cash equivalents |
(567,893 | ) | ||
Cash and cash equivalents, beginning of period |
590,250 | |||
|
|
|||
Cash and cash equivalents, end of period |
$ | 22,357 | ||
|
|
|
Successor | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2011 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 431,321 | $ | 575,860 | $ | 163,367 | $ | 66,660 | $ | 23,314 | $ | 218,187 | $ | 801 | $ | 1,479,510 | ||||||||||||||||
Intersegment |
— | 46,738 | — | 38,588 | — | — | (85,326 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
431,321 | 622,598 | 163,367 | 105,248 | 23,314 | 218,187 | (84,525 | ) | 1,479,510 | |||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
366,265 | 605,170 | 218 | 75,066 | 152 | 192,068 | (84,764 | ) | 1,154,175 | |||||||||||||||||||||||
Operating |
17,470 | 8,420 | 110,814 | 9,027 | 6,206 | 5,006 | 70 | 157,013 | ||||||||||||||||||||||||
General and administrative |
9,757 | 8,904 | 16,816 | 6,521 | 6,712 | 11,560 | 16,745 | 77,015 | ||||||||||||||||||||||||
Depreciation and amortization |
11,379 | 4,867 | 10,233 | 5,986 | 9,271 | 6,502 | 2,951 | 51,189 | ||||||||||||||||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net |
64 | (36,625 | ) | (8 | ) | 4 | 44,663 | (200 | ) | 1,599 | 9,497 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
404,935 | 590,736 | 138,073 | 96,604 | 67,004 | 214,936 | (63,399 | ) | 1,448,889 | |||||||||||||||||||||||
Earnings from equity method investments |
15,004 | — | — | — | — | — | — | 15,004 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
41,390 | 31,862 | 25,294 | 8,644 | (43,690 | ) | 3,251 | (21,126 | ) | 45,625 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income), net Interest expense |
3,749 | 17,222 | 24,685 | 2,346 | 1,005 | 365 | 10,836 | 60,208 | ||||||||||||||||||||||||
Other expense (income), net |
(1,600 | ) | (2,112 | ) | (2,811 | ) | (10 | ) | 46 | (173 | ) | (8,329 | ) | (14,989 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
2,149 | 15,110 | 21,874 | 2,336 | 1,051 | 192 | 2,507 | 45,219 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 39,241 | $ | 16,752 | $ | 3,420 | $ | 6,308 | $ | (44,741 | ) | $ | 3,059 | $ | (23,633 | ) | $ | 406 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 32,397 | $ | 2,197 | $ | 4,874 | $ | 14,952 | $ | 5,313 | $ | 4,667 | $ | 2,080 | $ | 66,480 | ||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total assets at December 31, 2011 (excluding intersegment receivables) |
$ | 586,882 | $ | 205,394 | $ | 258,306 | $ | 94,960 | $ | 183,179 | $ | 89,239 | $ | 73,221 | $ | 1,491,181 | ||||||||||||||||
Equity investments at December 31, 2011 |
$ | 143,259 | $ | 183,984 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 327,243 |
Successor | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 222,927 | $ | 664,673 | $ | 144,754 | $ | 48,402 | $ | 38,371 | $ | 149,557 | $ | 361,650 | $ | 1,630,334 | ||||||||||||||||
Intersegment |
22,927 | 53,623 | — | 27,388 | — | — | (103,938 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
245,854 | 718,296 | 144,754 | 75,790 | 38,371 | 149,557 | 257,712 | 1,630,334 | ||||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
149,383 | 690,970 | 67 | 50,800 | — | 129,449 | 245,263 | 1,265,932 | ||||||||||||||||||||||||
Operating |
25,498 | 9,074 | 95,072 | 6,342 | 8,406 | 4,742 | 4,306 | 153,440 | ||||||||||||||||||||||||
General and administrative |
10,525 | 9,511 | 18,942 | 6,626 | 5,286 | 10,352 | 25,995 | 87,237 | ||||||||||||||||||||||||
Depreciation and amortization |
27,643 | 6,764 | 9,556 | 5,480 | 7,881 | 6,183 | 7,375 | 70,882 | ||||||||||||||||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net |
6,895 | (35 | ) | (14 | ) | 12 | — | 8,837 | 89,355 | 105,050 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
219,944 | 716,284 | 123,623 | 69,260 | 21,573 | 159,563 | 372,294 | 1,682,541 | ||||||||||||||||||||||||
Earnings from equity method investments |
1,949 | — | — | — | — | — | — | 1,949 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
27,859 | 2,012 | 21,131 | 6,530 | 16,798 | (10,006 | ) | (114,582 | ) | (50,258 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
15,384 | 15,496 | 25,108 | 2,254 | 3,998 | 13 | 23,880 | 86,133 | ||||||||||||||||||||||||
Other expense (income), net |
(1,569 | ) | (2,983 | ) | 617 | (753 | ) | (88 | ) | (199 | ) | 9,313 | 4,338 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
13,815 | 12,513 | 25,725 | 1,501 | 3,910 | (186 | ) | 33,193 | 90,471 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 14,044 | $ | (10,501 | ) | $ | (4,594 | ) | $ | 5,029 | $ | 12,888 | $ | (9,820 | ) | $ | (147,775 | ) | $ | (140,729 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 16,731 | $ | 5,781 | $ | 4,308 | $ | 3,623 | $ | 8,964 | $ | 4,516 | $ | 4,051 | $ | 47,974 | ||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total assets at December 31, 2010 (excluding intersegment receivables) |
$ | 507,909 | $ | 342,475 | $ | 269,958 | $ | 76,048 | $ | 230,789 | $ | 90,264 | $ | 149,745 | $ | 1,667,188 | ||||||||||||||||
Equity investment in White Cliffs at December 31, 2010 |
$ | 152,020 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 152,020 |
Successor | ||||||||||||||||||||||||||||||||
Month Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 11,930 | $ | 59,546 | $ | 12,930 | $ | 4,399 | $ | 3,297 | $ | 12,079 | $ | 53,147 | $ | 157,328 | ||||||||||||||||
Intersegment |
2,085 | 4,477 | — | 2,245 | — | — | (8,807 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
14,015 | 64,023 | 12,930 | 6,644 | 3,297 | 12,079 | 44,340 | 157,328 | ||||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
6,317 | 75,593 | — | 4,495 | 11 | 10,242 | 43,378 | 140,036 | ||||||||||||||||||||||||
Operating |
907 | 1,642 | 11,345 | 921 | 657 | 1,142 | 151 | 16,765 | ||||||||||||||||||||||||
General and administrative |
2,012 | 1,435 | 1,726 | 975 | 575 | 1,310 | (21 | ) | 8,012 | |||||||||||||||||||||||
Depreciation and amortization |
4,937 | 509 | 962 | 427 | 655 | 304 | 997 | 8,791 | ||||||||||||||||||||||||
Loss on disposal or impairment of long-lived assets, net |
— | — | 23,119 | — | — | — | — | 23,119 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
14,173 | 79,179 | 37,152 | 6,818 | 1,898 | 12,998 | 44,505 | 196,723 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
(158 | ) | (15,156 | ) | (24,222 | ) | (174 | ) | 1,399 | (919 | ) | (165 | ) | (39,395 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
3,047 | 1,987 | 1,015 | 358 | 418 | — | 344 | 7,169 | ||||||||||||||||||||||||
Other expense (income), net |
(307 | ) | (3 | ) | (583 | ) | (2 | ) | 6 | (58 | ) | (276 | ) | (1,223 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
2,740 | 1,984 | 432 | 356 | 424 | (58 | ) | 68 | 5,946 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | (2,898 | ) | $ | (17,140 | ) | $ | (24,654 | ) | $ | (530 | ) | $ | 975 | $ | (861 | ) | $ | (233 | ) | $ | (45,341 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 2,037 | $ | 1,752 | $ | 948 | $ | 859 | $ | 724 | $ | 490 | $ | 651 | $ | 7,461 |
Predecessor | ||||||||||||||||||||||||||||||||
Eleven Months Ended November 30, 2009 | ||||||||||||||||||||||||||||||||
Crude | SemStream | SemCAMS | SemGas | SemLogistics | SemMexico | Corporate and Other |
Consolidated | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||
External |
$ | 256,931 | $ | 402,553 | $ | — | $ | 39,099 | $ | 33,393 | $ | 167,063 | $ | 2,196 | $ | 901,235 | ||||||||||||||||
Intersegment |
— | 26,306 | — | 16,131 | — | — | (42,437 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues |
256,931 | 428,859 | — | 55,230 | 33,393 | 167,063 | (40,241 | ) | 901,235 | |||||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below |
178,705 | 425,470 | — | 37,700 | 565 | 144,142 | (42,409 | ) | 744,173 | |||||||||||||||||||||||
Operating expense |
17,716 | 9,006 | — | 9,002 | 7,186 | 3,983 | 414 | 47,307 | ||||||||||||||||||||||||
General and |
7,436 | 5,410 | — | 4,371 | 4,353 | 7,129 | 15,549 | 44,248 | ||||||||||||||||||||||||
Depreciation and amortization |
10,878 | 4,813 | — | 8,296 | 8,615 | 2,942 | 3,430 | 38,974 | ||||||||||||||||||||||||
Loss on disposal or impairment of long- |
— | — | — | 13,625 | — | — | — | 13,625 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
214,735 | 444,699 | — | 72,994 | 20,719 | 158,196 | (23,016 | ) | 888,327 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating income (loss) |
42,196 | (15,840 | ) | — | (17,764 | ) | 12,674 | 8,867 | (17,225 | ) | 12,908 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expenses (income): |
||||||||||||||||||||||||||||||||
Interest expense |
6,292 | 2,174 | — | 739 | 627 | — | 2,209 | 12,041 | ||||||||||||||||||||||||
Other expense (income), net |
(1,643 | ) | — | — | (92 | ) | (3,009 | ) | (772 | ) | (3,176 | ) | (8,692 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expenses (income) |
4,649 | 2,174 | — | 647 | (2,382 | ) | (772 | ) | (967 | ) | 3,349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from continuing operations before reorganization items and income taxes |
$ | 37,547 | $ | (18,014 | ) | $ | — | $ | (18,411 | ) | $ | 15,056 | $ | 9,639 | $ | (16,258 | ) | $ | 9,559 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions to long-lived assets |
$ | 45,645 | $ | 3,399 | $ | — | $ | 11,516 | $ | 9,523 | $ | 14,112 | $ | 5,651 | $ | 89,846 |
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||
SemCAMS |
$ | 552 | $ | 886 | $ | (6,899 | ) | $ | — | |||||||||
SemLogistics |
(3,331 | ) | 2,244 | (459 | ) | 4,192 | ||||||||||||
SemMexico |
629 | 259 | (72 | ) | 2,118 | |||||||||||||
Corporate and other |
(266 | ) | (9,612 | ) | 221 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||||
|
|
|
|
|
|
|
|
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Natural gas and natural gas liquids |
$ | 570 | * | $ | 104,134 | * | ||
Crude oil |
21,803 | 18,608 | ||||||
Asphalt and other |
10,688 | 7,104 | ||||||
|
|
|
|
|||||
$ | 33,061 | $ | 129,846 | |||||
|
|
|
|
* | The significant decrease in natural gas and natural gas liquids from December 31, 2010 to December 31, 2011 is due to the contribution of assets from our SemStream segment to NGL Energy. |
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Product prepayments |
$ | 2,396 | $ | 3,761 | ||||
Other prepaid expenses |
18,685 | 16,255 | ||||||
Margin deposits |
596 | * | 14,884 | |||||
Derivative assets |
162 | 4,368 | ||||||
|
|
|
|
|||||
Total other current assets |
$ | 21,839 | $ | 39,268 | ||||
|
|
|
|
* | The decrease in margin deposits from December 31, 2010 to December 31, 2011 is primarily due to the contribution of assets from our SemStream segment to NGL Energy. $12.6 million of the $14.3 million decrease is due to the contribution of assets to NGL Energy. |
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Debt issuance costs, net |
$ | 6,642 | * | $ | 23,435 | * | ||
Other |
5,923 | 6,740 | ||||||
|
|
|
|
|||||
Total other noncurrent assets, net |
$ | 12,565 | $ | 30,175 | ||||
|
|
|
|
* | See Note 17 for discussion of debt issuance costs. |
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Land |
$ | 50,329 | $ | 52,765 | ||||
Pipelines and related facilities |
208,175 | 162,472 | ||||||
Storage and terminal facilities |
221,072 | 299,333 | ||||||
Natural gas gathering and processing facilities |
247,768 | 236,308 | ||||||
Linefill |
13,003 | 18,200 | ||||||
Office and other property and equipment |
32,980 | 20,151 | ||||||
Construction-in-progress |
54,788 | 38,077 | ||||||
|
|
|
|
|||||
Property, plant and equipment, gross |
828,115 | 827,306 | ||||||
Accumulated depreciation |
(84,880 | ) | (45,491 | ) | ||||
|
|
|
|
|||||
Property, plant and equipment, net |
$ | 743,235 | $ | 781,815 | ||||
|
|
|
|
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
SemStream |
$ | — | $ | 53,707 | ||||
SemLogistics |
— | 44,220 | ||||||
SemMexico |
9,453 | 9,896 | ||||||
|
|
|
|
|||||
Total |
$ | 9,453 | $ | 107,823 | ||||
|
|
|
|
Balance, November 30, 2009 (Successor) |
$ | 188,812 | ||
Currency translation adjustments |
(1,968 | ) | ||
|
|
|||
Balance, December 31, 2009 (Successor) |
186,844 | |||
Impairments (Note 6) |
(61,173 | ) | ||
Deconsolidation of White Cliffs (Note 5) |
(17,000 | ) | ||
Currency translation adjustments |
(848 | ) | ||
|
|
|||
Balance, December 31, 2010 (Successor) |
107,823 | |||
Impairments (Note 6) |
(47,804 | ) | ||
Contribution of SemStream assets to NGL Energy (Note 5) |
(50,071 | ) | ||
Currency translation adjustments |
(495 | ) | ||
|
|
|||
Balance, December 31, 2011 (Successor) |
$ | 9,453 | ||
|
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
SemStream |
$ | — | $ | 19,679 | ||||
SemMexico |
8,907 | 12,539 | ||||||
Corporate and other |
43 | 46 | ||||||
|
|
|
|
|||||
Total |
$ | 8,950 | $ | 32,264 | ||||
|
|
|
|
Balance, November 30, 2009 (Successor) |
$ | 134,452 | ||
Amortization |
(4,218 | ) | ||
Currency translation adjustments |
378 | |||
|
|
|||
Balance, December 31, 2009 (Successor) |
$ | 130,612 | ||
Amortization |
(16,181 | ) | ||
Impairment (Note 6) |
(39,446 | ) | ||
Deconsolidation of White Cliffs (Note 5) |
(43,267 | ) | ||
Currency translation adjustments |
546 | |||
|
|
|||
Balance, December 31, 2010 (Successor) |
$ | 32,264 | ||
Amortization |
(4,664 | ) | ||
Contribution of SemStream assets to NGL Energy (Note 5) |
(12,408 | ) | ||
Impairment (Note 6) |
(5,048 | ) | ||
Currency translation adjustments |
(1,194 | ) | ||
|
|
|||
Balance, December 31, 2011 (Successor) |
$ | 8,950 | ||
|
|
For year ending: |
||||
December 31, 2012 |
$ | 2,017 | ||
December 31, 2013 |
1,676 | |||
December 31, 2014 |
1,332 | |||
December 31, 2015 |
1,060 | |||
December 31, 2016 |
847 | |||
Thereafter |
2,018 | |||
|
|
|||
Total estimated amortization expense |
$ | 8,950 | ||
|
|
|
Successor | ||||||||||||||||||||||||||||||||||||||||
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting* | Total | Level 1 | Level 2 | Level 3 | Netting* | Total | |||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||
Commodity derivatives |
$ | 393 | $ | — | $ | — | $ | (231 | ) | $ | 162 | $ | 97,857 | $ | 1,993 | $ | 2,499 | $ | (97,981 | ) | $ | 4,368 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total assets |
$ | 393 | $ | — | $ | — | $ | (231 | ) | $ | 162 | $ | 97,857 | $ | 1,993 | $ | 2,499 | $ | (97,981 | ) | $ | 4,368 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||||||||||||||
Commodity derivatives |
$ | 231 | $ | — | $ | — | $ | (231 | ) | $ | — | $ | 101,563 | $ | 7,494 | $ | 3,046 | $ | (97,981 | ) | $ | 14,122 | ||||||||||||||||||
Warrants |
12,180 | — | — | — | 12,180 | — | — | 17,192 | — | 17,192 | ||||||||||||||||||||||||||||||
Interest rate swaps |
— | 358 | — | — | 358 | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total liabilities |
$ | 12,411 | $ | 358 | $ | — | $ | (231 | ) | $ | 12,538 | $ | 101,563 | $ | 7,494 | $ | 20,238 | $ | (97,981 | ) | $ | 31,314 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net assets (liabilities) at fair value |
$ | (12,018 | ) | $ | (358 | ) | $ | — | $ | — | $ | (12,376 | ) | $ | (3,706 | ) | $ | (5,501 | ) | $ | (17,739 | ) | $ | — | $ | (26,946 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | Relates primarily to exchange traded futures. Gain and loss positions on multiple contracts are settled net on a daily basis with the exchange. |
Successor | Predecessor | |||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||||||||||||||||||||||||||
Warrants | Commodity Derivatives |
Total | Warrants | Commodity Derivatives |
Total | Warrants | Commodity Derivatives |
Total | Commodity Derivatives |
|||||||||||||||||||||||||||||||||
Net assets (liabilities)—beginning balance |
$ | (17,192 | ) | $ | (547 | ) | $ | (17,739 | ) | $ | (16,909 | ) | $ | (23,438 | ) | $ | (40,347 | ) | $ | (16,037 | ) | $ | (15,663 | ) | $ | (31,700 | ) | $ | 11,324 | |||||||||||||
Transfers out of Level 3(*) |
8,934 | (419 | ) | 8,515 | — | 4,072 | 4,072 | — | — | — | — | |||||||||||||||||||||||||||||||
Total realized and unrealized gain (loss) included in earnings(**) |
8,258 | 2,783 | 11,041 | (283 | ) | (5,351 | ) | (5,634 | ) | (872 | ) | (5,372 | ) | (6,244 | ) | (34,390 | ) | |||||||||||||||||||||||||
Settlements |
— | (1,817 | ) | (1,817 | ) | — | 24,170 | 24,170 | — | (2,403 | ) | (2,403 | ) | 10,610 | ||||||||||||||||||||||||||||
Fresh-start and plan effect adjustments |
— | — | — | — | — | — | — | — | (19,244 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net assets (liabilities)—ending balance |
$ | — | $ | — | $ | — | $ | (17,192 | ) | $ | (547 | ) | $ | (17,739 | ) | $ | (16,909 | ) | $ | (23,438 | ) | $ | (40,347 | ) | $ | (31,700 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Amount of total gain or loss included in earnings for the period attributable to the change in unrealized gain or loss relating to assets and liabilities still held at the reporting date |
$ | — | $ | — | $ | — | $ | (283 | ) | $ | (547 | ) | $ | (830 | ) | $ | (872 | ) | $ | (10,222 | ) | $ | (11,094 | ) | $ | (13,158 | ) |
(*) | In these tables transfers in and transfers out are recognized as of the beginning of the reporting period for commodity derivatives and as of the transfer date for warrants. |
(**) | Gains and losses related to commodity derivatives are reported in product revenue, gains and losses related to warrants are recorded in other expense (income), and gains and losses related to fresh-start and plan effect adjustments are recorded in reorganization items gain (loss) in the consolidated statements of operations. |
Successor | ||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
|||||||
Sales |
18,869 | 16,227 | ||||||
Purchases |
18,572 | 14,955 |
Successor |
||||||||||||
December 31, 2011 |
December 31, 2010 | |||||||||||
Other |
Other Current Liabilities |
Other Current Assets |
Other Current Liabilities |
|||||||||
$162 | $ | — | $ | 4,368 | $ | 14,122 |
Successor |
Predecessor | |||||||
Year Ended |
Year Ended |
Month Ended |
Eleven Months | |||||
$2,153 | $(11,969) | $(13,589) | $(32,268) |
Canada | United Kingdom |
Mexico | Total | |||||||||||||
Cash and cash equivalents |
$ | 47,791 | $ | 9,964 | $ | 8,754 | $ | 66,509 | ||||||||
Other current assets |
63,418 | 2,836 | 29,979 | 96,233 | ||||||||||||
Noncurrent assets |
167,513 | 170,371 | 50,506 | 388,390 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
278,722 | 183,171 | 89,239 | 551,132 | ||||||||||||
Current liabilities |
$ | 33,480 | $ | 23,979 | $ | 23,374 | $ | 80,833 | ||||||||
Noncurrent liabilities |
80,282 | 33,686 | 4,258 | 118,226 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
113,762 | 57,665 | 27,632 | 199,059 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net assets |
$ | 164,960 | $ | 125,506 | $ | 61,607 | $ | 352,073 | ||||||||
|
|
|
|
|
|
|
|
|
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
U.S. |
$ | 30,292 | $ | (35,242 | ) | $ | (18,478 | ) | $ | 3,488,471 | ||||||
Foreign |
(29,886 | ) | (105,487 | ) | (26,863 | ) | 53,531 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated |
$ | 406 | $ | (140,729 | ) | $ | (45,341 | ) | $ | 3,542,002 | ||||||
|
|
|
|
|
|
|
|
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
Current income tax provision (benefit): |
||||||||||||||||
Foreign |
$ | 7,427 | $ | 7,376 | $ | (2,518 | ) | $ | (53,182 | ) | ||||||
U.S. federal |
— | — | — | — | ||||||||||||
U.S. state |
4 | 120 | 106 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
7,431 | 7,496 | (2,412 | ) | (53,182 | ) | |||||||||||
Deferred income tax provision (benefit): |
||||||||||||||||
Foreign |
(7,252 | ) | (16,570 | ) | (5,146 | ) | 59,492 | |||||||||
U.S. federal |
(2,251 | ) | 2,450 | 311 | — | |||||||||||
U.S. state |
(344 | ) | 401 | 38 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
(9,847 | ) | (13,719 | ) | (4,797 | ) | 59,492 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision (benefit) for income taxes |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||
|
|
|
|
|
|
|
|
Successor | Predecessor | |||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 406 | $ | (140,729 | ) | $ | (45,341 | ) | $ | 3,542,002 | ||||||
U.S. federal statutory rate |
35 | % | 35 | % | 35 | % | 35 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision at statutory rate |
142 | (49,255 | ) | (15,869 | ) | 1,239,701 | ||||||||||
State income taxes—net of federal benefit |
(221 | ) | 339 | 93 | — | |||||||||||
Effect of rates other than statutory |
(1,360 | ) | 2,447 | (7,151 | ) | (4,226 | ) | |||||||||
Effect of U.S. taxation on foreign branches |
(10,460 | ) | (36,920 | ) | — | — | ||||||||||
Foreign tax adjustment |
— | — | (1,442 | ) | (10,595 | ) | ||||||||||
Impairment of goodwill |
15,745 | 21,411 | — | — | ||||||||||||
Partnership income not subject to tax provision |
— | — | — | (1,218,570 | ) | |||||||||||
Foreign tax credit and offset to branch deferreds |
9,339 | 13,392 | (99,190 | ) | — | |||||||||||
Impact of valuation allowance on deferred tax assets |
(13,152 | ) | 38,184 | 115,418 | — | |||||||||||
Other, net |
(2,449 | ) | 4,179 | 932 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision for income taxes |
$ | (2,416 | ) | $ | (6,223 | ) | $ | (7,209 | ) | $ | 6,310 | |||||
|
|
|
|
|
|
|
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Deferred tax assets: |
||||||||
Net operating loss and other credit carryforwards |
$ | 43,009 | $ | 34,625 | ||||
Compensation and benefits |
1,606 | 3,334 | ||||||
Unrealized gain/(loss) |
93 | — | ||||||
Inventories |
48 | 729 | ||||||
Intangible assets |
56,328 | 40,212 | ||||||
Pension plan |
4,541 | 3,398 | ||||||
Allowance for doubtful accounts |
2,189 | 5,573 | ||||||
Deferred revenue |
7,281 | 7,267 | ||||||
Foreign tax credit and offset to branch deferreds |
77,293 | 84,969 | ||||||
Other |
6,798 | 5,984 | ||||||
less: valuation allowance |
(148,945 | ) | (162,202 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
50,241 | 23,889 | ||||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Intangible assets |
(9,069 | ) | (12,582 | ) | ||||
Prepaid expenses |
(142 | ) | (109 | ) | ||||
Unrealized gain/(loss) |
— | (2,497 | ) | |||||
Property, plant and equipment |
(76,957 | ) | (90,803 | ) | ||||
Equity Investment in partnerships |
(28,696 | ) | (1,658 | ) | ||||
Other |
(8,586 | ) | (1,379 | ) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
(123,450 | ) | (109,028 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets (liabilities) |
$ | (73,209 | ) | $ | (85,139 | ) | ||
|
|
|
|
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
SemGroup corporate revolving credit facility |
$ | 82,000 | $ | — | ||||
Previous SemGroup corporate credit facilities |
— | 324,065 | ||||||
Rose Rock credit facility |
— | — | ||||||
SemLogistics credit facility |
23,180 | 24,289 | ||||||
SemMexico credit facility |
4,046 | — | ||||||
Capital leases |
109 | 89 | ||||||
|
|
|
|
|||||
Total long-term debt |
109,335 | 348,443 | ||||||
less: current portion of long-term debt |
26,058 | 12 | ||||||
|
|
|
|
|||||
Noncurrent portion of long-term debt |
$ | 83,277 | $ | 348,431 | ||||
|
|
|
|
SemGroup Facility |
Rose Rock Facility |
SemLogistics Facility |
SemMexico Facility |
Capital Leases |
Total | |||||||||||||||||||
For the year ended: |
||||||||||||||||||||||||
December 31, 2012 |
$ | — | $ | — | $ | 23,180 | $ | 2,857 | $ | 21 | $ | 26,058 | ||||||||||||
December 31, 2013 |
— | — | — | 1,189 | 21 | 1,210 | ||||||||||||||||||
December 31, 2014 |
— | — | — | — | 21 | 21 | ||||||||||||||||||
December 31, 2015 |
— | — | — | — | 21 | 21 | ||||||||||||||||||
December 31, 2016 |
82,000 | — | — | — | 20 | 82,020 | ||||||||||||||||||
Thereafter |
— | — | — | — | 5 | 5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 82,000 | $ | — | $ | 23,180 | $ | 4,046 | $ | 109 | $ | 109,335 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 30, 2009 (Successor) |
$ | 23,791 | ||
Accretion |
205 | |||
Changes in estimated timing and amount of payments (Note 6) |
4,738 | |||
Currency translation adjustments |
262 | |||
|
|
|||
Balance at December 31, 2009 (Successor) |
28,996 | |||
|
|
|||
Accretion |
3,523 | |||
Payments made |
(1,144 | ) | ||
Currency translation adjustments |
1,509 | |||
|
|
|||
Balance at December 31, 2010 (Successor) |
32,884 | |||
|
|
|||
Accretion |
4,114 | |||
Payments made |
(341 | ) | ||
Currency translation adjustments |
(771 | ) | ||
|
|
|||
Balance at December 31, 2011 (Successor) |
$ | 35,886 | ||
|
|
Capital Leases |
Operating Leases |
|||||||
For year ending: |
||||||||
December 31, 2012 |
$ | 21 | $ | 5,185 | ||||
December 31, 2013 |
21 | 4,674 | ||||||
December 31, 2014 |
21 | 2,446 | ||||||
December 31, 2015 |
21 | 1,774 | ||||||
December 31, 2016 |
20 | 1,564 | ||||||
Thereafter |
5 | 7,920 | ||||||
|
|
|
|
|||||
Total future minimum lease payments |
$ | 109 | $ | 23,563 | ||||
|
|
|
|
At December 31, 2011 | ||||||||
Volume (barrels) |
Value ($) | |||||||
Fixed price purchases |
150 | 13,442 | ||||||
Fixed price sales |
150 | 14,496 | ||||||
Floating price purchases |
32,217 | 3,128,239 | ||||||
Floating price sales |
32,835 | 3,140,511 |
|
Shares issued on Emergence Date |
40,882,496 | |||
Shares subsequently issued in settlement of pre-petition claims |
182,174 | |||
Remaining shares required to be issued in settlement of pre-petition claims |
335,326 | |||
Issuance of shares under employee and director compensation programs |
419,403 | |||
Shares issued upon exercise of warrants |
7 | |||
|
|
|||
Total shares |
41,819,406 | |||
|
|
|||
Par value per share |
$ | 0.01 | ||
|
|
|||
Common stock on December 31, 2011 balance sheet |
$ | 418,194 | ||
|
|
Warrants issued on Emergence Date |
1,634,210 | |||
Warrants subsequently issued in settlement of pre-petition claims |
191,752 | |||
Remaining warrants to be issued in settlement of pre-petition claims |
352,985 | |||
Warrants exercised |
(7 | ) | ||
|
|
|||
Total warrants at December 31, 2011 |
2,178,940 | |||
|
|
|||
Fair value per warrant at December 31, 2011 |
$ | 5.59 | ||
|
|
|||
Warrant value included within other noncurrent liabilities on December 31, 2011 consolidated balance sheet |
$ | 12,180,275 | ||
|
|
|
Unvested Shares |
Average Grant Date Fair Value(*) |
|||||||
Awards granted - 2009 |
148,533 | $ | 25.00 | |||||
|
|
|||||||
Outstanding at December 31, 2009 |
148,533 | $ | 25.00 | |||||
Awards granted - 2010 |
562,295 | $ | 25.00 | |||||
Awards vested - 2010 |
(92,833 | ) | $ | 25.00 | ||||
Awards forfeited - 2010 |
(115,093 | ) | $ | 25.00 | ||||
|
|
|||||||
Outstanding at December 31, 2010 |
502,902 | $ | 25.00 | |||||
Awards granted - 2011 (**) |
173,982 | $ | 28.90 | |||||
Awards vested - 2011 |
(201,361 | ) | $ | 25.00 | ||||
Awards forfeited - 2011 |
(65,017 | ) | $ | 25.36 | ||||
|
|
|||||||
Outstanding at December 31, 2011 |
410,506 | $ | 26.59 |
(*) | The grant date fair value of awards issued prior to our listing on the New York Stock Exchange was estimated at $25 per share, which was the per share reorganization value of the Company (described in Note 8). |
(**) | For certain of the awards granted in 2011, the number of shares that will vest is contingent upon our achievement of certain specified targets. If we meet the specified maximum targets, approximately 30,000 additional shares could vest. |
Year ended December 31, 2012 |
158,915 shares | |||
Year ended December 31, 2013 |
107,042 shares | |||
Year ended December 31, 2014 |
174,093 shares |
Month ended December 31, 2009 |
$ | 233,720 | ||
Year ended December 31, 2010 |
$ | 6,229,920 | ||
Year ended December 31, 2011 |
$ | 5,424,360 | ||
Year ended December 31, 2012 (estimated) |
$ | 4,745,894 | ||
Year ended December 31, 2013 (estimated) |
$ | 1,520,852 | ||
Year ended December 31, 2014 (estimated) |
$ | 1,007,879 |
|
Successor | ||||||||
December 31, 2011 |
December 31, 2010 |
|||||||
Change in projected benefit obligation: |
||||||||
Projected benefit obligation at beginning of year |
$ | 29,182 | $ | 26,475 | ||||
Service cost |
742 | 783 | ||||||
Interest cost |
1,494 | 1,560 | ||||||
Actuarial (gains) losses |
1,247 | 3,096 | ||||||
Benefits paid |
(5,430 | ) | (3,985 | ) | ||||
Currency translation adjustment |
(468 | ) | 1,253 | |||||
|
|
|
|
|||||
Projected benefit obligation at end of year |
26,767 | 29,182 | ||||||
Change in fair value of plan assets: |
||||||||
Fair value of plan assets at beginning of year |
24,063 | 19,959 | ||||||
Employer contributions |
2,903 | 5,186 | ||||||
Actual return on plan assets |
(143 | ) | 1,831 | |||||
Benefits paid |
(5,430 | ) | (3,985 | ) | ||||
Currency translation adjustment |
(385 | ) | 1,072 | |||||
|
|
|
|
|||||
Fair value of plan assets at end of year |
21,008 | 24,063 | ||||||
|
|
|
|
|||||
Funded status: |
$ | (5,759 | ) | $ | (5,119 | ) | ||
|
|
|
|
|||||
Accumulated benefit obligation at end of year |
$ | 25,242 | $ | 25,940 |
Successor | ||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
||||||||||
Service cost |
$ | 742 | $ | 783 | $ | 64 | ||||||
Interest cost |
1,494 | 1,560 | 131 | |||||||||
Expected return on plan assets |
(1,585 | ) | (1,452 | ) | (116 | ) | ||||||
Settlement loss |
703 | 174 | — | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
$ | 1,354 | $ | 1,065 | $ | 79 | ||||||
|
|
|
|
|
|
Year |
Estimated Benefit Payments |
|||
2012 |
$ | 1,831 | ||
2013 |
1,727 | |||
2014 |
1,716 | |||
2015 |
1,914 | |||
2016 |
2,096 | |||
2017 - 2021 |
9,452 |
Asset Value at December 31, 2011 (in thousands) |
Asset Value at December 31, 2010 (in thousands) |
Actual Allocation at December 31, 2011 |
Normal Allocation Per Investment Policy |
Minimum Allocation Per Investment Policy |
Maximum Allocation Per Investment Policy |
|||||||||||||||||||
Cash and cash equivalents |
$ | 101 | $ | 30 | 0 | % | 6 | % | 0 | % | 25 | % | ||||||||||||
Pooled funds—fixed income |
7,986 | 9,170 | 38 | % | 39 | % | 30 | % | 50 | % | ||||||||||||||
Pooled funds—Canadian equities |
6,724 | 8,078 | 32 | % | 30 | % | 20 | % | 50 | % | ||||||||||||||
Pooled funds—non-Canadian equities |
6,197 | 6,785 | 29 | % | 25 | % | 5 | % | 60 | % | ||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 21,008 | $ | 24,063 | ||||||||||||||||||||
|
|
|
|
|
Currency Translation |
Employee Benefit Plans |
Interest Rate Swaps |
Total | |||||||||||||
Balance, December 31, 2008 (Predecessor) |
$ | (40,071 | ) | $ | — | $ | — | $ | (40,071 | ) | ||||||
Currency translation adjustment |
28,109 | — | — | 28,109 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balances prior to fresh-start reporting |
(11,962 | ) | — | — | (11,962 | ) | ||||||||||
Fresh-start reporting adjustment |
11,962 | — | — | 11,962 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, November 30, 2009 (Successor) |
— | — | — | — | ||||||||||||
Currency translation adjustment |
(4,180 | ) | — | — | (4,180 | ) | ||||||||||
Changes related to benefit plans, net of income tax expense of $287 |
— | 846 | — | 846 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2009 (Successor) |
(4,180 | ) | 846 | — | (3,334 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Currency translation adjustment |
6,475 | — | — | 6,475 | ||||||||||||
Changes related to benefit plans, net of income tax benefit of $687 |
— | (2,026 | ) | — | (2,026 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2010 (Successor) |
2,295 | (1,180 | ) | — | 1,115 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Currency translation adjustment |
(13,075 | ) | — | — | (13,075 | ) | ||||||||||
Changes related to interest rate swaps net income tax benefits of $74 |
— | — | (284 | ) | (284 | ) | ||||||||||
Changes related to benefit plans, net of income tax benefit of $553 |
— | (1,631 | ) | — | (1,631 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2011 (Successor) |
$ | (10,780 | ) | $ | (2,811 | ) | $ | (284 | ) | $ | (13,875 | ) | ||||
|
|
|
|
|
|
|
|
|
Successor | Predecessor | |||||||||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
Month Ended December 31, 2009 |
Eleven Months Ended November 30, 2009 |
|||||||||||||||
Decrease (increase) in restricted cash |
$ | 25,827 | $ | 182,898 | $ | (36,911 | ) | $ | (15,082 | ) | ||||||||
Decrease (increase) in accounts receivable |
28,568 | (26,602 | ) | 4,567 | 318,706 | |||||||||||||
Decrease (increase) in receivable from affiliates |
(6,071 | ) | (337 | ) | — | — | ||||||||||||
Decrease (increase) in inventories |
(8,908 | ) | 36,895 | 8,497 | 34,807 | |||||||||||||
Decrease (increase) in derivatives and margin deposits |
14,287 | 12,146 | (4,495 | ) | (4,717 | ) | ||||||||||||
Decrease (increase) in other current assets |
(7,214 | ) | 67,216 | 31,850 | 645 | |||||||||||||
Decrease (increase) in other assets |
(1,874 | ) | 215 | 6,503 | 1,999 | |||||||||||||
Increase (decrease) in accounts payable and accrued liabilities |
(9,446 | ) | (11,349 | ) | 16,707 | (106,405 | ) | |||||||||||
Increase (decrease) in payable to affiliates |
6,614 | 257 | — | — | ||||||||||||||
Increase (decrease) in payables to pre-petition creditors |
(34,490 | ) | (217,471 | ) | (26,787 | ) | — | |||||||||||
Increase (decrease) in other noncurrent liabilities |
(897 | ) | 18,552 | 267 | — | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
$ | 6,396 | $ | 62,420 | $ | 198 | $ | 229,953 | |||||||||||
|
|
|
|
|
|
|
|
|
Summarized information on the consolidated results of operations of SemGroup Corporation (Successor) for the quarters during the year ended December 31, 2011 is shown below (in thousands, except per share amounts):
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
Total | ||||||||||||||||
Total revenues |
$ | 406,954 | $ | 344,219 | $ | 393,404 | $ | 334,933 | $ | 1,479,510 | ||||||||||
Loss (gain) on disposal or impairment of long-lived assets, net (Note 6) |
(64 | ) | (72 | ) | (1 | ) | 9,634 | 9,497 | ||||||||||||
Other operating costs and expenses |
394,784 | 335,854 | 387,570 | 321,184 | 1,439,392 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses |
394,720 | 335,782 | 387,569 | 330,818 | 1,448,889 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings from equity method investments |
2,064 | 4,086 | 4,016 | 4,838 | 15,004 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
14,298 | 12,523 | 9,851 | 8,953 | 45,625 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other expenses (income), net |
14,599 | 22,624 | (5,828 | ) | 13,824 | 45,219 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(301 | ) | (10,101 | ) | 15,679 | (4,871 | ) | 406 | ||||||||||||
Income tax expense (benefit) |
(324 | ) | 2,218 | 1,308 | (5,618 | ) | (2,416 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
23 | (12,319 | ) | 14,371 | 747 | 2,822 | ||||||||||||||
Income (loss) from discontinued operations, net of income taxes |
9 | 20 | (32 | ) | (7 | ) | (10 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
32 | (12,299 | ) | 14,339 | 740 | 2,812 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less: net income attributable to noncontrolling interests |
— | — | — | 435 | 435 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to SemGroup |
$ | 32 | $ | (12,299 | ) | $ | 14,339 | $ | 305 | $ | 2,377 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) per share—basic |
$ | 0.00 | $ | (0.30 | ) | $ | 0.34 | $ | 0.01 | $ | 0.06 | |||||||||
Earnings (loss) per share—diluted |
$ | 0.00 | $ | (0.30 | ) | $ | 0.34 | $ | 0.01 | $ | (0.06 | ) |
Summarized information on the consolidated results of operations of SemGroup Corporation (Successor) for the quarters during the year ended December 31, 2010 is shown below (in thousands, except per share amounts):
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
Total | ||||||||||||||||
Total revenues |
$ | 476,006 | $ | 315,899 | $ | 385,299 | $ | 453,130 | $ | 1,630,334 | ||||||||||
Loss on disposal or impairment of long-lived assets, net (Note 6) |
20 | 91,369 | 5,192 | 8,469 | 105,050 | |||||||||||||||
Other operating costs and expenses |
451,453 | 318,529 | 375,128 | 432,381 | 1,577,491 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses |
451,473 | 409,898 | 380,320 | 440,850 | 1,682,541 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings from equity method investments |
— | — | — | 1,949 | 1,949 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
24,533 | (93,999 | ) | 4,979 | 14,229 | (50,258 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other expenses, net |
15,015 | 31,230 | 18,409 | 25,817 | 90,471 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
9,518 | (125,229 | ) | (13,430 | ) | (11,588 | ) | (140,729 | ) | |||||||||||
Income tax expense (benefit) |
843 | (3,357 | ) | 2,242 | (5,951 | ) | (6,223 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
8,675 | (121,872 | ) | (15,672 | ) | (5,637 | ) | (134,506 | ) | |||||||||||
Income from discontinued operations, net of income taxes |
482 | 894 | 348 | 710 | 2,434 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
9,157 | (120,978 | ) | (15,324 | ) | (4,927 | ) | (132,072 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less: net income attributable to noncontrolling interests |
61 | 56 | 108 | — | 225 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to SemGroup |
$ | 9,096 | $ | (121,034 | ) | $ | (15,432 | ) | $ | (4,927 | ) | $ | (132,297 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) per share—basic |
$ | 0.22 | $ | (2.92 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (3.20 | ) | ||||||
Earnings (loss) per share—diluted |
$ | 0.20 | $ | (2.92 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (3.20 | ) |
|
Revenues |
$ | 9,708 | ||
Purchases |
$ | 11,270 | ||
Reimbursements from NGL Energy for transition services |
$ | 346 |
|
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